Preparing for an Audit
Small incorporated businesses have less than one-half of 1% chance of being audited, according to the IRS. But if you’re the lucky one chosen, it helps to have your ducks in a row. Much like an earthquake preparedness kit -- which you hope you never need but are mighty glad you’ve got – audit-ready files are worth keeping, just in case.
Of course, audits might occur for other reasons. You might be the type of business that requires independent audits (we go through one every year as a venture-backed company!).
Here’s the good news: if you’re a Bill.com user, you’re ahead of the game. You’re preparing for an audit even when you’re not preparing for an audit, just by virtue of using the Bill.com service. In the words of one of our customers:
"Let me just say that I thank my lucky stars every day for Bill.com. It has really helped during audit time. Instead of running around like a chicken with no head, collecting invoices, making photocopies, and then scanning and emailing to auditors, I simply have to log in to Bill.com and pull the invoices, without getting up from my seat. Thank you!"
Laura Korabiak, SugarSync
Below are widely recommended steps for preparing for an audit, followed by how Bill.com users are already prepared!
Get your paperwork in order. Accountants recommend you have all your expenses and payables organized and labeled by tax year.
Bill.com Users: your paperwork is already scanned, processed and searchable. No digging deep into filing cabinets or searching for misplaced papers.
Give your auditors access. Auditors will need access to your files, which could mean access to your office and your people, a potential slowdown for your entire team.
Bill.com Users: you can give the auditor access to your Bill.com account so they can do more work for themselves rather than keeping you or your team on standby. This “read-only” access lets you accommodate auditors without risk of any payments being made or data being altered.
Keep an audit trail. Auditors will want to know if something was approved prior to payment and if you followed documented processes.
Bill.com Users: Bill.com keeps an audit trail of all approvals, changes, and payments so auditors can get what they need without having to follow a paper trail or follow up with individuals in your company.
Ensure everything is reconciled. Accounting data that’s in sync with bank records helps an audit move more quickly and smoothly.
Bill.com Users: Because payments are made from Bill.com and synced with your accounting package, there is no chance of any data not reconciling.
Have all your records handy. Auditors may ask to examine canceled checks, tax returns, deposits and other business records to ensure your filing was timely and accurate. They might also review state, federal and Social Security (FICA) withholding, Medicare taxes, advance earned-income credit, unemployment compensation, workers’ compensation premiums, salaries, bonuses, and tax preparer or accountant records.
Bill.com Users: Bill.com is great for storing much more than bills. You can store all your financial documents with no disk space limitations, so thy are available to auditors with a few clicks. Want a physical copy? For just $34.99, you can order a DVD of your past year’s documents, far easier to hand-off to an auditor than reams of paper.
Audits are never fun. But with Bill.com they can be much easier!