Virtual Reality


Virtual Reality

Incomplete electronic records are creating difficulties for bookkeepers.

A complete record of all transactions is essential not only to keep track of how business resources are used but also because the Canada Revenue Agency (CRA) requires it. Unfortunately, the simplification of many transaction processes has removed important details and is testing the patience of bookkeepers
responsible for obtaining, recording, allocating and saving complete document records.

Online Information Is Difficult to Gather

As more transactions are done online (e.g., “tap and go” or credit/debit card purchases) gathering all the information required for the bookkeeping system is becoming increasingly problematic. Owners and employees need to understand what bookkeepers need and why they insist that appropriate documentation be available.

As a start: 
1. The CRA and other regulatory bodies need to be able to see the transaction data that supports
the calculation of tax obligations and entitlements. The CRA insists that original paper and electronic records be kept. However, a scanned image of a paper document can be accepted as the original record if the records are produced, controlled and maintained according to the latest standards set by the Canadian General Standards Board, the federal government organization responsible for setting standards used in Canadian business.
2. Monthly credit-card statements do not contain sufficient detail of online transactions to determine:
* thetypeofpurchaseandthereforetheallocationtothecorrectgeneralledgeraccounts
 * whethertheitemwasofapersonalnatureorbusinessrelated
 * whethertheitemwasadrawbytheowner,adebtrepaymentoratransfertoanotheraccount
 * whetherGSTorHSTwaschargedonthetransaction.
3. Most bank statements do little to assist in:  

* determiningwhetherdepositsareownercontributions,transfersfromotheraccounts,
accounts receivable collected or reversals of errors
* providingdetailastothetypeofexpenditureforaccountallocationpurposes o addressingwhetherwithdrawalsarepersonal,paymentsinfull,paymentsonaccountor
payments to government or employees.


Accurate Historical Data Essential to Decision Making

The historical financial data provided by the accounting records is essential to management when deciding to borrow money, pay dividends, or make distributions under a profit sharing plan. A host of other business decisions regarding expansion, marketing, training, hiring, firing, etc. are also predicated on the analysis of current and historical financial data.
The correct completion of tax documents is entirely dependent on the allocation of transaction data to the correct accounts. Corporate, owner and employee tax returns could be impacted if data is allocated incorrectly.


Bookkeeper Access

If data is received and stored on the computer to which only the recipient of the data has access, the bookkeeper will be unable to record the transaction. Even though most businesses provide the bookkeeper with access to either a cloud-based system or internal servers, nevertheless the individual initiating the transaction must provide information about the nature of the transaction. For example, an invoice from a hardware store may imply a purchase is part of capital spending but it could be for repairs and maintenance and is therefore an expense.


Posting Difficulties

Another difficulty with electronic filing of invoices, regardless of the software used, is that data is often saved in a general folder and then transferred to the bookkeeper for processing. Posting data from an electronic page is difficult because attachments come in single-file format thereby forcing the reader either to recall each file electronically and post from the screen or to print each attachment to ensure that all the data required for bookkeeping has been obtained.
Another problem for the bookkeeper is indicating in the document that the document has been posted and to which account. Failure to complete this simple process may result in duplicate entries or missed documents and make it difficult to track back to the specific transaction.


No single approach is right for every organization.


Effectively Processing Electronic Data

No single approach is going to satisfy all organizations, but the following are some ideas that may help:

* Provide each employee with a list of expense accounts and a brief summary of the allocation criteria. 
* Ensure each expenditure has an electronic note attached indicating expense allocation. 
* Create folders for specific categories or suppliers and have electronic invoices saved by month in those specific category folders.
* Develop a monthly spreadsheet of electronic invoices with a category breakout and a reference to specific electronic invoices.
* Attach posting notes to the electronic document indicating the account allocation and/or the journal entry establishing that the document was posted. 
* Establish protocols for electronically filing the backup supporting the entries into the system. Manual systems incorporate alphanumeric systems to track customers and suppliers. Determine whether a similar approach is required to file electronic invoices.
* Scan all incoming hardcopy data and file it with the electronic data. 
* Create an audit trail of electronic information posted to the bookkeeping system by tracing through a customer invoice number or date. Ensure you can trace not only from the books to the electronic invoice but also from the electronic invoice to the books. 
* Maintain a record of the software format, operating systems and the hardware on which the data was recorded. The CRA requires you to be able to retrieve the data and provide it in a readable format. Because you are required to keep all records and supporting documents for a period of six years, the rapid changes in software, operating systems and hardware may require the migration of data as your bookkeeping system is updated. 
* Ensure that documents and records for acquisition and disposal of property, the shareholder registry, agreements, long-term obligations, leases and other historical information that may have an impact 10 or 15 years down the road are maintained in separate files and available to be carried forward to the next generation of computers.


No Time Like the Present

An accounting and financial reporting system is only as good as the bookkeeping processes that record the original transactions. If the source documents are not available to support journal and ledger entries and, ultimately, the financial statement and corporate tax returns, there will be problems establishing the veracity of the submissions. That, in turn, will raise issues with all those who have a stake in the corporate operations.
Within a few years, all transactions will likely be virtual. Because it may take some trial and error to figure out how your business is going to manage and maintain virtual data, now is the time to get started.

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