Looking after the small expenses can be important
Small expenses are common in all businesses. This does not mean that recording them is no less important. The following, while involving a very small cash expense initially, is a great example of the need to keep good accounting records. I can’t name the business, but the facts are real.
In this case, a relatively large business made quarterly refund claims from a foreign VAT authority. The average refund was about £120,000 per quarter. Each time the claim was sent, the registered postage expense (approx. £1) was recorded in the petty cash spreadsheet, but receipts were not retained as back-up to the expenses. One VAT claim went missing in the post and this was not discovered for more than 12 months. The VAT authority in question had a 12 month time limit on claims. The business pleaded with the VAT authority. They agreed that the claim could be resubmitted on proof of postage of the original claim. And, I’m sure you can guess what happened next. Yes, as no proof of postage was retained to support the petty cash spreadsheet, the company could not resubmit the claim.