How to keep things organized in case of an audit

In business, there are many uncertainties, but one there is one thing that is sure to happen sooner or later, and that is that you will be audited. You may have your tax submissions audited by the IRS, or you may have your financial systems and processes by and auditing firm. Audits can be a headache, and if you are not organized, they can be a very big deal. But you can take some of the stress out an auditing experience by being organized and well prepared.

The best way, or maybe the only way for you to organize your business so that you will be ready without having to scramble to come up with the required data is to make effective recordkeeping a part of your business processes. You need an accounting system that can effectively keep track of expenses that are related to your taxes. You need an effective document management system so that receipts, invoices, and other important documents, can be retrieved with the click of the mouse on your computer. If you are still using hard copy documents, and putting them into filing cabinets, stop now! You may want to retain the original document, but scan all your hard copy documents, and assign them a document identifier so that your accounting or financial system can easily be linked to these documents for fast and easy retrieval. Now in the 21st century, there is just no excuse for not doing this.

If you have financial systems that are constantly under Sarbanes-Oxley scrutiny by an auditing firm, then you need to have change control and incident management software to track changes that occur to your financial system. The principle behind this kind of software is no different than any other database; recordkeeping, recordkeeping, recordkeeping. Make sure that the employees in your organization are entering important information related to changes, or abnormal events to your system as they are occurring. Make sure that the system that you purchase to track these changes is recognized by whatever industry that you are in. The system should enforce business rules to the extent possible so that employees can't circumvent the controls placed on them. The recordkeeping must occur as the business processes are taking place so as to force the employees to do the required documention. Employees have a tendency to be in a hurry so they can get their work done, and they view the recordkeeping as unnecessary and unimportant. They will plan on doing the "paperwork" later, but will forget because the next urgent and important business process will come along, leaving the previous one without the proper documentation. Make sure that your workflow is straight forward without unnecessary steps so that the documentation can be completed as quickly as possible.

Your accounting and incident management software should have an easy to use and versatile reporting system. Putting a lot of information into a database isn't very valuable if you can't get the data out. Wouldn't you love to be able to respond instantly to an auditor with a few clicks of a mouse and wipe the smug smile off his face?

By using decent software, good reporting, document management, good record keeping and good business practices, you will be able to be organized, and handle any audit that comes your way.

Rating: 5/5 (1 votes cast)

---

Categories: Legalities,

Help others find this article:
Socializer, Digg, del.icio.us, reddit, StumbleUpon

Favorites: Add to favorites
Tags: audit IRS auditing tax accounting financial systems recordkeeping data business processes management documentation document taxes Sarbanes-Oxley software workflow database