|
Creatures
of Habit
Eileen
Reppenhagen,
CGA, QuickBooks
ProAdvisor.
We are all
creatures of
habit. We
have the
same
customers.
We have the
same
suppliers.
Most days
when we get
up, we go to
the same
coffee
shops. And,
when it
comes to
business, we
all have to
create proof
of
reasonable
kilometers.
Clients,
also being
creatures of
habit,
typically do
not show up
with a km
log. The
ones that do
are those
salesmen who
were audited
in the
1980’s. All
of their
vehicle
expenses
were denied
back then. I
can always
tell who
they are
because they
come in with
a typed km
log and each
day
itemized.
Common
client
attitudes
run like
this, well
you used a %
that I gave
you last
year and it
worked, so
what is
wrong with
doing that
again?
Auditors, on
the other
hand, have a
different
attitude.
Produce a km
log or I
will deny
your entire
claim of
vehicle use
for
business.
Prove it’s
reasonable.
Even if your
client does
come with a
km log, how
are you
going to
know if it
is
reasonable
or not? As
the
accounting
professionals,
we are
supposed to
check for
reasonability
- why
wouldn’t
that include
the claim
for vehicle
expenses?
Is there a
way to meet
in the
middle? I
think that
there is and
it only
takes a
couple of
hours and a
good
attitude.
Let’s start
with a
premise.
Eighty
percent of
the time
your clients
go to the
same twenty
places. This
is a
variation on
Pareto’s
80/20 Rule.
Another two
premises I
find are
often true
are: 80% of
the client’s
revenue
comes from
20% of their
customers;
and 80% of
supplies
come from
20% of their
suppliers:
-
If
we
take
the
first
premise
and
run
a
QuickBooks
Sales
by
Customer
Report;
export
it
into
Excel;
add
three
columns
(the
first,
number
of
visits,
the
second,
km’s
and
the
third,
a
total
of
the
first
column
times
the
second
column)
to
the
right
of
the
figures,
-
I
will
wager
that
your
client
can,
with
a
few
minutes
of
thought,
tell
you
how
often
they
visited
each
customer’s
place
of
business.
Using maps.google.ca
Maps
and
Directions,
you
can
find
out
the
km’s
from
your
client’s
business
to
their
customer’s
location.
-
If
we
take
the
second
premise
about
suppliers,
and
pull
up
an
Income
Statement
for
the
year;
click
on
the
total
expenses;
sort
the
expenses
by
payee;
take
out
the
columns
you
won’t
need,
leaving
the
Date,
Memo
and
Amount
columns
(the
Payee
name
will
be
at
the
top
of
each
set
of
data),
-
Just
a
quick
note
about
why
to
sort
by
Payee:
if
you
sort
this
report
by
Vendor
and
have
used
another
type
of
name
other
than
vendor
or
no
vendor
at
all
in a
general
journal
entry,
you
may
not
get
the
entire
expense
report.
Check
that
the
total
agrees
to
your
summary
before
proceeding.
-
Export
the
Expenses
sorted
by
Payee
Report
to
Excel;
put
the
same
three
columns,
as
in
the
first
bullet
above,
to
the
right
of
the
report;
ask
your
client
to
complete
how
many
times
he
went
to
each
of
these
vendors
and
how
far
it
was.
Once
again,
we
are
creatures
of
habit.
We
shop
at
the
same
stores.
There are
some other
checks of
reasonability
you can do
just as
quickly and
easily. Run
the balance
sheet and
add these
items to
your
summaries of
sales and
expenses:
-
Bank
trips.
Count
the
number
of
trips
to
the
bank
by
the
number
of
deposits.
-
Review
inventory
purchases,
same
procedure
as
expense
purchases.
How
many
times
did
your
client
visit
their
suppliers?
Were
the
goods
delivered
or
did
the
client
pick
them
up?
Did
the
client
visit
once
or
twice
or
more
than
that
for
each
purchase?
-
Review
capital
transactions,
same
procedure.
-
Check
the
flipside.
Examine
personal
driving
habits.
Ask
about
vacations,
trips
to
the
shop,
school,
entertainment,
dining
out,
visits
to
see
family
members,
churches
and
hospitals.
Do a
quick
tally
of
the
two
to
see
how
much
you
can’t
account
for.
-
If
your
client
uses
a
Day
Timer
or a
calendar,
or
if
they
put
their
appointments
in
Outlook,
ask
them
to
produce
these
records
to
put
them
with
the
calculations.
I can tell
you from 18
years of
experience
that this
process,
with
assistance
to keep it
on track,
rarely takes
more than
two hours.
Why would
your client
pay you for
this?
Consider
that you are
justifying
what could
be as much
as a $10,000
expense. Why
would your
client not
find this
valuable? I
think a
couple of
hours of
investment
is worth the
effort to
document the
claim. The
alternative,
an outright
denial and
demand for
proof of
driving
habits years
after the
fact. Who
needs it?
In the end,
a km log is
a matter of
attitude.
Either you
have it or
you don’t…a
good
attitude,
that is, and
oh yes, a km
log
Eileen
Reppenhagen
CGA.,
Certified
QuickBooks
ProAdvisor
Tel: 1
604
943.7414
Email:
or
contact
her
through
her web
site: www.taxdetective.ca
|
