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Record Keeping & Fraud Lisa Patrick

Why proper record keeping is so valuable to your business!

Record keeping is considered by many entrepreneurs as one of the "least important" part of operating a business (unless you are an accountant). However, good record keeping is essential to your financial survival.  It also provides you the information paper trail tool to navigate through your records to uncover where the possibility of fraud is occurring or has occurred.

Reason #1:

If you have a business in Canada, The Income Tax Act requires you to keep records so that you can prepare complete and accurate tax returns.  Keeping careful records of all your financial transactions is also in your own best interest for the following reasons:

·      Good records help you to identify from whom you received your income.  You may receive cash or property from many different places.  Unless you have records showing sources of your income, you may be UNABLE to prove that some are non-business or non-taxable.

·      Well kept records can mean tax savings since they serve as a reminder of deductible expenses.  You may forget some of your expenses when you prepare your tax return unless you record them when you incur or pay them.

·      Well kept records can prevent most of the problems you might encounter when your tax returns are audited.  If you records are so incomplete that your taxable income cannot be determined for them, taxation auditors will have to use other methods to establish income.  This could be very time consuming and inconvenient for you; it could also be your disadvantage if your records do not support your claims.

·      Your records will keep you better informed about the financial position of your business.  Statistics derived from proper records can tell you what is happening with the business.  An analysis of these statistics can help lead you to the reason why. 

      Successful use of records can show you:
          trends on what is occurring in your business
          allow you to compare performance on past budgets
          assist you to prepare future budgets

·      Proper books and records may help you to obtain assistance from banks and other creditors.  Not only will your books and records give accurate information about your current financial position, but they will also show that you are constantly aware of what is happening within your business.

Therefore, keeping good records requires more than just knowing which records to keep and for how long. It also includes setting up systems and maintaining records in a way that makes it easier for you to monitor the progress of your business to track business is improvement, which items are selling and changes that are required – knowing how best to keep records can be the difference between the failure and success of your business.


Businesses are now finding it vital to their continued success to implement measures of protecting themselves against corporate fraud.  Preparation is the key to making sure that businesses are ready to handle a situation of corporate fraud. Businesses need to recognize that taking due diligent measures to ensure that those who handle your records and provide record keeping services have established credibility through third party verification of an absence criminal record and verification of professional memberships and designations. Utilizing companies like IHonest who specialize with third party verification are vital.

If businesses are recognizing that corporate fraud is prevalent within their own companies and they are taking measures within like: finding out as much as they can about the business they are dealing with, and then applying the right amount of common sense, they prepare their business for protection against fraud.

But, what about ensuring that the professionals they deal with have proven that they are qualified and skilled but what about their credibility and background.  Does a former employee or professional who providing a testimonial/reference make them instantly credible?  No, what that testimonial/reference says is that professional provided a quality service.

The Ottawa police department sates that their investigators not only investigate corporate fraud that are financial institutions but also commercial businesses and professionals.

These are the questions that the Ottawa Police Department ask:

“What should I do if I uncover a fraud situation in my company?
What should I do if a company that I have dealt with has defrauded me?

The answer to the above questions is the same - document, document, document!

Corporate fraud investigations are quite extensive and often very complex. It is important that you gather as much documentation as possible to be included in your police report. It is important to know where your documentation came from and what value it has for investigative purposes.

A statement or summary must accompany your documentation to explain what has happened and why you believe a fraud has occurred. Your documentation must be in some form of order and not simply gathered together in a random fashion.

 You MAY be required to provide a forensic audit at your own cost. The Ottawa Police Service does not provide this service. Your file will be reviewed and discussed with you first before any such request for an audit is requested.” Ottawa Police Service

Now we have a police department telling us; document! Therefore, proper record keeping is vital.

What does the Ottawa Police Department say about prevention of fraud.  Well they tell us to “do your homework!”

 Imagine you own a business and the professional you hired to handle your record keeping has misappropriate of cash or inventory, or conducted fraudulent financial reporting?  You find out in the investigation that this professional was charged Under the Criminal Code of Canada,  Section cc. 380.(1) and you did not complete due diligence …

All I ask is -  How would you feel?  What would you change?

5 Bookkeeping Tips Lisa Patrick
  1. Keep your records up to date.  It is much easier to remember what an expense was when it’s fresh in your mind as opposed to 6 months ago.
  2. Keep all your records in one place. File by the month or by the type of expense.
  3. Purchase the tools to keep an accurate record of your income and expenses.
  4. Keep your personal and business expense receipts separate.  Set up a bank account for your business that way all your record keeping will be straightforward and you can account for your expenses.
  5.  Keep a record of your time spent keeping your books.  This way you can make an informed decision if it worth it for you to take care of your bookkeeping or hire someone to do it for you.


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