Audit Ready In Small Business

An audit is the verification for accuracy of financial records. Small business need to conduit internal audits to help identify any potential problems of inadequate bookkeeping practices. The most important thing in small business is good record keeping. A small business must maintain up to date income and expense records. In a tax audit you need to be able to identify income, distinguish income from personal investment, define all expenses and prove funds that are not income for the business.

In any business there are items that need to be in place such as a mission statement, an organizational chart and a good accounting program. Taxes and legal obligations of business include: Adequate payroll records, timely payments to the appropriate agency for all taxes and all business licenses be kept up to date. A good software, good reporting, record keeping and good business practices are the steps needed to handle any audit.

Preparing for an audit all records will need to be gathered. Bank statements, credit card statements, invoices and sales slips, and any loan documents for the business. These will need to be current and in full. The previous years tax return may also be needed. The expense report for the business will include rent, equipment, payroll, and any other operating expenses. Anything that goes into and out of a business needs to be on a report.  When a good accounting system is in place a report generated proves and backs up these items. The key to a successful audit is documentation.