As technology continues to revolutionize our billing, payment and other business processes, owner/managers still need to pay attention to their record keeping of these transactions.

Whether it's business or personal financial transactions, the operative word today is convenience. While cold hard cash and cheques still have their place, most everyone now uses credit cards, debit cards, pre-authorized automatic bill payments, ATM deposits, transfers and withdrawals, and telephone or computer banking.

However, the convenience of these transactions can spawn a relaxed attitude towards record keeping. While electronic transactions are easy and fast, you still need to track those transactions and keep your hard copy receipts. If not, you could be losing money.

Track Expenses

Generally, expenses incurred for the purpose of earning income are deductible from income. For a company to claim its business expenses, it needs to retain the original source documents for the expenditures. While these are not submitted with the corporate tax return, if the CCRA requests documentation, they will disallow any unsupported expense. Also consider if you do not have the source documents, you could be miscalculating your GST/HST input tax credits.

Track Cash Withdrawals

With quick access to cash at the ATM, the owner/manager could forget some of the cash expenditures that were made or lose valuable time at the end of the month trying to sort out a mess of receipts that have been stuffed in a glove compartment, purse, or briefcase.

Cash withdrawals from the company's bank account may be petty cash for business expenses or advances to the shareholder. Where the cash is used for business expenses but the documentation has been misplaced, the withdrawn amounts could be taxed as income to the shareholder.

Keep Careful Records

Proper financial records are the backbone of the business, not only for meeting PST/GST/HST and other tax regulations and preparing financial statements, but also for keeping your eye on the bottom line. Consider also that when postings must be completed without the initial documentation, this increases the time spent at year-end preparing the company's financial statements.

To ensure your financial transactions are properly recorded, make sure everyone in your company follows these simple guidelines:

• Attach original source documents to credit card transaction slips or monthly statements.
• Keep receipts for any cash received and write down whether it's a cash sale or a payment on an account receivable, including the customer name, amount, and invoice number.
• If you use pre-authorized bank withdrawals for expenses such as insurance, leases, or loan payments, review these on a periodic basis and reconcile with invoices or other documentation.
• If you use ATM or telephone or PC banking to pay the company's bills, attach the ATM transaction slip to the invoice or note the financial institution's transaction number on the invoice.
• When making debit card purchases from the business account, note the details of the business expense on the receipt.
• Keep the transaction slips when you make automatic cash withdrawals. As you spend the cash, record the details in your day planner and keep all the receipts in an orderly way in the planner pocket or an envelope. Remember to reconcile the transaction slips to the bank statement on a monthly basis.

While technology allows payments, transfers, and deposits to be made anytime and almost anywhere, keep in mind that careful tracking of these transactions and appropriate documentation are still a hands-on exercise. Whether you are using a PC-based accounting package or handwriting the transactions in a journal, proper documentation at the time the transactions are carried out is both a time and moneysaver.

The above provides general information only. It should not be regarded or relied upon as accounting or taxation advice or opinions. Logan Katz LLP Chartered Accountants would be pleased to provide more information or specific advice on matters of interest to you.

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