Demystifying Source Docs
Ever wondered why we're always asking for source docs? What's the big deal, anyway?
Below, we'll be focusing on CCE's processes and protocols regarding source docs — as well as the CRA's requirements.
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What is a Source Doc?
Source documents provide a paper trail for your financial journey and offer tangible evidence for every transaction your business makes.
Every time money goes in or out, a source document should be created — it records the details, ensuring accuracy and transparency in financial records. General examples of source documents can include both the invoices, bills and purchase records you receive from your suppliers, as well as the invoices and sales receipts you send to your customers and clients when you make a sale.
If you're having issues submitting your source docs, head over to our Mastering Dext post here!
Source Doc Essentials
How can you tell if something is an adequate Source Doc?
The five points below must be included and visible on a source doc in order to meet the CRA’s documentation guidelines:
Date
Name of Supplier
Description of Item(s) Purchased
Sales Taxes and Amounts Applied
Total Paid
What’s Not a Source Doc?
It can be tough to get the hang of what is or isn't a source doc, we hear you! We'll share FAQs and general examples at the bottom of this post — for now, we thought it may be helpful to identify a handful of documents that folks frequently mistake as source documents:
Credit card slips or payment receipts do not provide any more information than what would appear on your bank statement, and don't provide the context required to sufficiently support and define your transactions.
Order confirmations are great for tracking purchases, but they don't typically include all of the information required by the CRA.
Payment confirmations, including Etransfers, Paypal transfers etc, don’t typically include sufficent information to support why the transfer was made.
Taking a moment to understand what to upload (and what not to) will save you time, reduce back-and-forth, and keep everything moving efficiently. Uploading the right documents from the start means fewer corrections later—and faster, cleaner results on your end.
If you submit a source document that doesn't meet the requirements above, the transaction will land in your OT in hopes of tracking down a sufficient and valid document→ Save yourself time and avoid filling your Dext inbox with unnecessary documents like PayPal confirmations or e-transfer receipts.
Why Do Source Docs Matter?
Accurate Categorization and Reporting: Reviewing source documents helps our bookkeeping team categorize each transaction correctly, ensuring that transactions appear on the correct financial report within your records. Accurate categorization is crucial for you to understand exactly what's going on in your business, and enables us to review your data against your current goals, budgets and targets.
Audits: Source docs are a trusted secret weapon during audits. They offer concrete proof that financial transactions indeed took place and provide clarity into the way these transactions were recorded. Without them, an auditor may be inclined to refuse previously claimed expenses, which could lead to a reassessment, increased taxes owing, and potential interest. No, thank you!
Input Tax Credits: Calling all GST/HST-registered businesses! Source docs are your allies in demonstrating the amount of GST/HST you spend on purchases made for your business. The more you spend (if you can prove it!), the more you save! We claim all amounts you spend on GST/HST against all GST/HST you collect to offset the balance payable to the CRA.
Quick Tips:
Best Practices for Managing Source Docs:
Make Dext Work for You –– Take a few minutes upfront to set up Dext properly. This is where you’ll save the most time long-term.
We recommend adding your Dext email-in address to key workflows (e.g., ask suppliers to CC it on invoices), and setting up inbox rules to automatically forward receipts and bills as they come in. If you’re on the go, the mobile app makes it easy to snap and upload receipts immediately, rather than letting them pile up.
The goal is to make this as close to “set it and forget it” as possible. When documents flow into Dext automatically, you avoid time spent tracking things down later—and we can keep your books and reporting moving quickly without delays.
For more support on using Dext, click here to read our Mastering Dext post.
FAQs:
We've compiled answers to some common questions to help further demystify these documents.
My previous bookkeeper let me drop a shoebox of source docsoff at their office now and then - can't I do that?
Nope! We're a fully digital firm and happy to be so! Virtual documentation allows us to work faster and keep our services affordable - you're not paying us to un-crinkle your source docs! Plus, going digital eliminates printing, mailing, and storage costs, as well as any risk of lost or damaged items in transit. Digital docs are also more manageable and don't fade over time as physical copies do. Audits are done digitally too, so let's keep everyone happy!
Why do I have to get this to you NOW? Couldn't I track this down in the future if I really need it?
Sure, you probably could, but...do you want to? Audits can be stressful on their own, without adding a long list of old transactions you need to track down years later. What if suppliers have closed, moved, or lost records? And what if the audit happens during your busy season What's easier: remembering what you bought last week or seven years ago? Let's keep it simple.
Do I have to keep paper copies once I upload an image of them?
Another win for digitization! The CRA accepts electronic copies as long as they accurately represent the paper document, provide the same information, and maintain clarity. Now you can finally use those shoeboxes under your bed for....shoes!
I lost the source doc and (despite my best efforts) am not able to track it down. What do I do now?
Your OT offers two options: either we skip the transaction altogether or we claim it without the source doc. It's totally up to you and how you feel about it. Some folks are okay with claiming small expenses without docs, especially if they're business-related. You're the boss, and we follow the direction you provide via the OT sheet. But just a heads up, we don't recommend claim GST Input Tax Credits without the docs because of potential CRA audits.
Oh, and just a friendly reminder: it's usually a good idea to try and find those missing source docs if you can. We don't want you missing out on legitimate business expenses. Remember, higher expenses mean lower profits, which equals lower taxes owed.
What happens after I upload my source docs? Once you submit your source docs, we take care of them in two main ways:
Dext and QBO Archives: Once submitted to Dext and published (by us!), your source docs are stored in both the Archive Folder in Dext as well as within transaction records in QBO; images of your source docs are directly attached to the corresponding transaction in your QuickBooks Online (QBO) file - making it super easy to access again if needed.
Google Drive Backup: We export all submitted docs at least twice a year and add them to a Google Drive, providing an additional layer of security and accessibility.
