How It Works
A Business Scenario
At the moment, this is how your business accounting might work (things will vary from country to country).
We’ll take the example of a travelling Sales Rep. There will be receipts for food. Some of these may be entertainment, which will probably have a Fringe Benefit or similar Tax line associated with them. Some of these may be for meals away from home, which will have a 100% deductible employee expense tax line. Some will have drinks, some of which will fall under one of the two mentioned categories, some may need to be repaid to the company if they are outside company guidelines.
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Where the Sales Rep has paid cash and lost the receipt (or couldn’t obtain one) and wished to claim a work expense, an internal form will need to be filled out. Cash will need to be reconciled. Some lost receipts may result in either no payment to the Sales Rep or no tax deduction to the business. Paper receipts also need to be kept for many years to justify the expenses. This increases the liability of a business, as paper receipts deteriorate, can get lost or in the case of a fire, get burnt. None of which generally removes your liability for having receipts to justify your claims.
All of this will have to be entered and checked by the Finance Dept worker, where typo’s have been made, they will have to spend time on working out where the errors are and reconciling end of day payments.
This will eventually be part of the accounting that gets sent to the Accountant, who will have to look through everything to make sure it’s approximately right, then it will eventually make its way to the Tax Department, who have to check the Accountant’s work and send an advice back to the Accountant as to how much tax to pay and when to pay it. There is bound to be errors in the accounts. They may be large or they may be small. In the case of a Tax Office Audit, they may pick up these errors and the business may be liable for unpaid taxes and subject to large fines. Even without any negative Tax Audit outcomes, the cost to some businesses in time and money to have their Accountants answer all the Tax Office questions, has been enough to send many a business broke, so much so, that we now have the absurd situation where businesses in some countries are urged to take out insurance against being Audited by the Tax Office.
With the blockchain and Audrey, all that happens is the Sales Rep pays for their expenses using the blockchain. Everything else is automatic, correct and near instant.
Everything is paid for with one or more Crypto Currencies. You have a Sales Rep that has lunch. They then fill up their car with Gas/Petrol/Fuel and they stop in to the printers to pickup and pay for the new sales brochure before meeting the client. On the way back to the office, the manager has called to say someone’s chair is broken, could they please buy a screwdriver on the way back to fix it up.
Normally, each of these items would have to be manually keyed in to your accounting system, they would then have to be cross referenced with the credit card statements and Fuel Card statements of the Sales Rep. Maybe the screwdriver was paid for with cash, so a cash reimbursement form and balancing of the cash accounts would need to take place. The Sales Rep would have to fill out a reimbursement form and this would have to be added to their salary payment. Tax lines would need to be assigned to each item to decide whether they are tax deductible or how much of them is tax deductible. Are they a depreciative item that can only be claimed over a few years?
Because a crypto currency and blockchain technology can capture a lot of data, each item and purchase is electronically tagged with a unique ID and tax information, including the percentage of Sales Tax/VAT/GST and it’s tagged with the sellers ID and the purchasers (your companies) ID. So nothing needs to be done.
Audrey goes out to the blockchain, finds your business ID that paid for each of these items and automatically assigns each item an internal department and a tax line, while automatically flagging a reimbursement for the Sales Rep after the Managers approval. Sales Tax/VAT/GST is automatically allocated and these claims/payments are automatically made to the Tax Department at the end of the tax period.
End of Financial Year tax returns are automatic, accurate and can be easily and automatically approved by the Tax Department. Simple and cheap, with potential savings to the world economy of up to $8 Trillion per year.
More information in the Project Document under the Whitepaper menu.