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Avalara

Audit Preparation: How to Stay on the Auditor’s Nice List


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Reposted from Avalara.com

Preparing for an audit is more than a defensive strategy employed by smart companies. Audit readiness creates accountability between departments and core functions and ultimately strengthens and protects the bottom line.  Here’s why being prepared is crucial: Wakefield Research found that a typical negative audit can cost a business more than $96,000. 

Problems can become process improvements when looked at in a prudential light.

  1. Understand filing requirements. Review each state’s department of revenue site to determine filing specifics. Some states require everything from electronic filing to advance payment to specific forms.
  1. Calculate accurate sales tax rates. ZIP codes are the wrong tool for this job. Some cities in Colorado have at least 5 different sales tax rates for one ZIP code. Use geolocation to pinpoint exact addresses and rates by relying on the right source. (Link to: http://www.avalara.com/blog/2014/12/11/avalara-regional-sales-tax-report-november-2014/)
  1. Substantiate tax-exempt transactions. Exemption certificates are so easily inaccurate. From addresses to named buyer to expiration dates, errors in any of these is one of the top reasons for audits.
  1. Keep detailed records that are easily accessible. Detailed records that are easily accessible not only help companies be audit-ready, they’re a great way to maximize efficiency and strengthen processes. Questions about fulfillment or inventory or transactions can’t easily be answered if there is no coordination and tracking of each within an overarching financial system such as an ERP.

Getting ready for a potential audit isn’t just for the overachievers and keeners. The preparation process can improve the outlook for even the middle of the roaders in 2015. Get started on your own process by using this handy Audit Preparation Checklist.

By Avalara, Sales Tax Automation for Microsoft Dynamics

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