Panic may start creeping in if you have recently discovered your restaurant is about to get audited. However, the process is usually nowhere near as invasive as you may believe.
The role of the taxman is to make sure that you are up to date with your payments and looking to calculate the correct amount of tax owed. As a restaurant, here’s what you can prepare for, to ensure that your audit is a smooth one.
Organise your time
The amount of time you need to allocate will depend on what level your audit is. Some audits are simply conducted through the mail. Here they may ask for receipts, bank statements, payslips and copies of invoices.
If the audit is happening face to face, you will need to allocate more of your time. You would usually talk with an auditor first on the phone or in their office to discuss the processes and the specifics of why you are under question.
If the auditor requests to come to your restaurant, they will let you know how much time you need to set aside. Planning for at least half a day for visits will mean you can meet with them for several hours. Although it’s unlikely they will visit more than once a week, they may visit several times over the course of the audit.
The reason you are being audited
If you have been flagged for an audit, there will be a reason. This doesn’t mean you have done anything wrong, but they have a reason to suspect you have. This could be due to an accidental error on your part, or that your revenue has suddenly decreased or increased. For example, a restaurant that’s turning over a hefty revenue for a number of years and then suddenly plummets would be a prime case for an audit flag. This is a similar situation with expenses. A restaurant that has less revenue but an increase in expenses activity (which means less tax) are also a prime example for an audit. These examples don’t mean it necessarily happened, but you will need to prove and explain why these things happened.
For example, a restaurant that’s turning over a hefty revenue for a number of years and then suddenly plummets would be a prime case for an audit flag. This is a similar situation with expenses. A restaurant that has less revenue but an increase in expenses activity (which means less tax) are also a prime example for an audit. These examples don’t mean it will necessarily happened, but you will need to prove and explain why these things happened.
When the time arrives, the auditors will want a backup. This is where they focus on the areas that triggered the audit. If you can’t produce the documents, then this will make the auditors suspicious.
For examples, going through a restaurant’s statements will give the auditors a clear indication of the money coming in, which will be related to the revenue. The best thing you can do is have all your documentation together before the auditor arrives.
Audits usually take a long time. Aside from spending personal time with the auditors, you may also be asked to provide additional documentation. After you have made contact with the auditor, their office will begin working on your file. You can go months without hearing a peep from them, which in itself is stressful. You can ask your auditor for a time frame – they might be able to give you an indication on the next time you can expect to hear from them, but then again they may not.
Time Frame and Finances
Depending on the extent of the audit, it might be worthwhile hiring a representative to deal with all the work involved. By employing a professional company to deal with the auditor, you will be allowed to continue with the growth of your restaurant.
Hopefully using this information above, you and your restaurant will be better prepared for what the future holds, as well as a smoothly run audit. At Alexander, we specialise in restaurant audits. If you are looking for advice or help with you auditors then give us a call today.