Keeping your tax records pristine

Congratulations! You’ve almost made it to the end of yet another financial year. However, now that all that paper work associated with EOFY is looming, it’s time to consider how you’re going to get through it all.

In August 2014, Infusionsoft published a report on the attitudes of small business owners. The study found that small business owners valued their time above all else and, for these business owners, the driving factor behind starting a small business was the aspiration to find the freedom to live a lifestyle they enjoyed.

Intriguingly no-one cited working more hours and harder than ever, bogged down in administrative tasks as something they’d initially aspired to.

The research of more than 800 business owners, found 55% cited the time to get everything done as their greatest challenge and 56% stressed their loathing of engaging in financial tasks.

And although, the Infusionsoft research is largely U.S. centric, Australian business owners routinely tell us how much they value any time they can claw back from administration tasks. Some have even told us Shoeboxed has saved their sanity in the process.

As an Australian business owner, you know the end of financial year is likely to mean hours, possibly weeks, in front of a computer screen entering financial data, in an effort to avoid audits and punishing fines for incorrect lodgments by the ATO – cue yawning tinged with a little terror.

But what if you could ‘magic’ away some if not almost all of that data entry thanks to technology? Yes, really. It’s all down to a great piece of technology called OCR or optical character recognition.

However, when it comes to minimizing your tax-time pain with OCR technology, it’s important you understand what you’re relying on. There’s one key consideration when it comes to OCR: accuracy and that’s followed by two further concerns – privacy and compliance.

Accuracy:

Most receipt scanning apps use optical character recognition (OCR) technology. And whilst this sounds somewhat high-tech and reliable, it is important to know that OCR has, at best, around an 85% accuracy rate (but we’ve seen some apps get it as low as 50% right – especially when it comes to GST, vendor names, etc).

The only way to get around that is to have humans double check the data recorded is accurate. Otherwise, imagine how thrilled you’d be to be sifting through pdf after pdf, making changes to your data. Which brings us to privacy.

Privacy:

If you’re going to be having human verifiers sifting through all your personal and/or business records, including bank or credit card statements, you want to know that those people have undergone background and police checks to ensure maximum security. After all, you don’t want just anyone having access.

Plus employing Australian verifiers on staff (in our Sydney office), like we do at Shoeboxed, means strict compliance with the Australian Privacy Act.

ATO compliance:

Because it really comes down to meeting your tax obligations, you want to know that your recorded information meets the requirements of the ATO.

As an Australian small business owner, you’re required to keep your tax records for seven years. Now if you’ve got a business that’s generating maybe 20-50 receipts a month, over the period of seven years, that could add up to a LOT of paper. Just think how much that would be if you were a paper-centric business like a café or retail store with potentially tens or hundreds of transactions every day or a tradie on the road buying bits and pieces for each job.

What you need is a secure repository for all that paper, saved as pdfs – so that should anyone ever need it (like you, your accountant or heaven forbid, the ATO as part of an audit), it’s all there at your fingertips.

Recently, one Shoeboxed Australia customer, an accounting firm, had a client’s GST audited by the ATO. With the help of immaculate receipt management processes, the accountant was able to send that client’s GST records straight from Shoeboxed Australia to the ATO in minutes. This process saved their client days of time sorting receipts and potentially thousands of dollars in the process.

You also need to double check the ATO’s register for receipt scanning apps to make sure the technology you’re about to entrust your financial data to is registered. Shoeboxed’s is.

So if you’d like to ditch your data entry, keep your tax records pristine and save yourself some pain this end of financial year – we’d love to chat! You can call us on 1300 00 1333 or you can get started now.