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Digitizing accounting processes goes wrong in a few predictable places: records the CRA can’t read, scans that don’t meet the standard, and tax settings nobody checked after the switch. The rule behind most of them is short. You must keep your records for six years from the end of the last tax year they relate to, and electronic records have to stay readable for that whole stretch.
What does the CRA expect from digital records?
The CRA accepts three forms: paper, paper converted to electronic, and records that were electronic from the start. The last group has a catch. If a record was born electronic, you keep it electronic, even when you also print it.
The CRA’s circular on electronic record keeping puts it plainly:
A person who keeps records electronically is not relieved of any of the record keeping, readability, retention, and access responsibilities because he or she contracts out the record keeping function to a third party.
Information Circular IC05-1, Electronic Record Keeping, canada.ca
You also have to be able to hand the CRA a copy in a format its own software can process. The agency describes that as a non-proprietary, commonly used data format. A file that only opens inside your vendor’s app doesn’t meet that test on its own, so ask the vendor how you’d export everything.
And records belong in Canada. The CRA says to keep them at your place of business or your residence here, unless it gives written permission to keep them elsewhere. Reading a system that sits on a foreign server doesn’t count as keeping the records in Canada.
Where does digitizing accounting go wrong on scans and backups?
Most of the damage happens in the boring steps. Here is what the CRA pages say, next to what we’d check before you shred anything.
| Step | What the CRA says | What to check |
|---|---|---|
| Scanning paper receipts | The image must be an accurate reproduction meant to replace the paper, with no detail lost to poor resolution, tone or colour | Open a sample scan at full size and read the amount, date and supplier |
| Destroying the paper | Allowed once imaged to the national standard (CAN/CGSB 72.34) | Ask your scanning tool or vendor if it follows that standard, and keep the answer in writing |
| Backups | Keep copies on separate media, stored away from hazards, and restorable in a usable form | Restore one month of data each year to prove it works |
| Software changes | Note the software name and version used to create the records | Keep the old program, or an export the CRA can read |
Test it.
The restore test is the one people skip. The CRA’s own circular asks for periodic testing of backups, so a backup nobody has ever opened isn’t much of a backup.
Picture Sam, who runs a small print shop in Calgary. He phones in a scan app, bins a banker’s box of receipts, and two years later finds that half the images are blurry thumbnails. Nothing in the app told him. A ten-minute spot check on day one would have caught it, while the paper was still in the box.
What happens if the tax settings are wrong?
Switching systems means re-entering tax codes, and that’s where quiet errors creep in. Say a business in Ontario buys $2,400 of equipment. The GST/HST calculator shows $312 of HST on it at 13%. If the new software still carries the code from an Alberta-style 5% setup, it records $120. That’s a $192 gap on one purchase, and it repeats on every invoice that uses the code.
Nobody sees it until a return doesn’t match the bank. So pick ten old transactions, enter them in the new system, and compare the tax to the old figures. It takes an hour and catches most coding problems.
Does outsourcing the records move the responsibility?
No, and the quote above says so. If your cloud bookkeeping provider closes, changes its terms or locks an account over a missed payment, the six-year duty stays with you.
That’s why an export matters more than a nice dashboard. Before you commit, find out if you can pull every transaction and attachment out in one go, and if that costs anything. We couldn’t confirm any provider’s export terms, and they vary by product, so read the terms yourself.
Payroll is the other trap
Moving payroll into new software brings its own test. Run one employee through both systems before the first live paycheque. For an Ontario employee on $2,000 every two weeks, the payroll deductions calculator gives about $254.82 of income tax, $110.99 of CPP and $32.60 of EI per pay. If your new system is off by more than a few cents, stop and find out why.
The payroll remittance calculator adds your own share on top, about $156.63 per pay, for roughly $555 to send in per employee each period. Those are estimates for a simple case, not a replacement for the CRA’s payroll tables.
What should you do before you shred or switch?
Short list, in order. Export a full year from the old system and open it. Scan a sample and read it at full size. Run ten old transactions through the new tax codes. Write down the software name and version. Then, and only then, retire the old setup. If any step fails, you’ve lost an afternoon instead of a year of records.
What this page is based on
The record rules come from the Canada Revenue Agency‘s business pages on keeping records, acceptable formats and imaging, and from its Information Circular IC05-1 on electronic record keeping (dated February 2020). The payroll and HST figures come from this site’s calculators, which use 2026 data, and Sam’s print shop is invented. The CRA pages name the standard but we haven’t checked a particular vendor against it.
Frequently asked questions
How long do I keep digital accounting records?
Six years from the end of the last tax year they relate to, per the CRA. Some records, such as share registers, have longer rules.
Can I shred paper receipts after scanning them?
The CRA allows it once the images meet the national standard, CAN/CGSB 72.34. A casual phone photo may not qualify.
Can my records sit on a server outside Canada?
The CRA wants them kept in Canada, unless it gives written permission. Reading them from abroad doesn't count.
Does a cloud provider take over my duties?
No. You stay responsible for keeping, reading and producing the records.
Who can I ask about a specific software product?
The vendor, in writing, and the CRA for its own rules. We haven't verified any product.
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