How Often Should You Self-Audit Sales Tax?

Determining how often you should self-audit sales tax depends on the number of transactions your business has on a regular basis. For instance, if you only have a few thousand transactions every filing period, it might not be as necessary to self-audit your sales tax receipts. A million transactions a day gives more opportunity for mistakes than a smaller number of transactions. However, if you have a million transactions every day, it might be impossible to self-audit regularly without having dedicated staff for the job. It also depends on your budget and what you have in place already for programs. Logic would tell you that the higher the number of transactions, the more opportunity for things to go wrong. The higher the number of transactions, the greater the risk, and the more faults you’ll find when you’re auditing.

However there are more factors more than just the sheer number of transactions you have on a regular basis. If you find that you have faults in your operational systems that might lead to issues in your sales tax receipts, you’ll be more apt to have errors in your transactions, no matter how many you might have. However, it’s a catch-22 of sorts, in that you might not realize you have systemic issues without self-auditing for errors. The more money you spend ensuring your sales tax receipts are perfect, the fewer errors you’ll have — in theory. As we’ve discussed before, it’s too costly to get 100% compliance but aiming for that goal should be part of your company’s intentions. The more money you spend doing self-audits, the fewer problems you’ll encounter in the future but once again there’s a catch-22.

Spend lots of money to ensure that you’re compliant when you’re only finding errors that cost far less than the self-audit cost — you’re wasting both your money and time on a profitless action. Determining how often you need to self-audit comes down to both what you can afford and how many transactions you have that might be at risk. If the number of transactions you have is low and it won’t cost very much to self-audit, you gain higher compliance at a low cost, so it’s worth it to self-audit often. If you have a high number of transactions with extremely rigorous procedures, it might not be as necessary to self-audit as often. Our RecoveryLINK and DisclosureLINK software programs eliminate a lot of the pain in this decision by making self-auditing quick and cost effective. Contact us to see just how easy the process is.

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