Have you ever received that dreaded letter from the Federal Inland Revenue Service (FIRS)? The one that begins: “We have scheduled a tax audit of your company on…”
If you have, then you know the feeling. Your heart skips. Your palms sweat. For a moment, all the deals you’ve closed and the profits you’ve made suddenly feel meaningless.
This was exactly what one of our clients faced last year. A small but growing logistics company in Lagos, he had just signed a major new contract when the letter arrived. Panic set in immediately.
The Day the Audit Arrived
Like many entrepreneurs, he was a master of hustle but not of record-keeping. His “books” were scattered between WhatsApp chats with suppliers, crumpled receipts in his car’s glove compartment, and a few invoices sitting in Gmail.
When the audit notice came, he scrambled. He called his staff to dig through old files, begged suppliers to resend invoices, and even tried to piece together fuel expenses from ATM withdrawals.
The auditors arrived, calm but firm. They asked for VAT submissions, payroll records, and receipts for major purchases. Each time, he presented a folder. Each time, they shook their heads:
- “This receipt has no TIN.”
- “This invoice is not fiscal.”
- “This payment record does not reconcile with your bank statement.”
Within two hours, the verdict was clear. Because he had no verifiable records, the auditors used presumptive assessment — their own estimate of what his business “should” have earned and owed.
The figure was more than enough to wipe out his new contract’s profit. Worse, he had to pay immediately or face penalties.
That day, he learned the hard way: you don’t prepare for an audit when the letter arrives. You prepare every single day your business is alive.
What an Audit Really Looks Like
For entrepreneurs who have never gone through one, here’s what an audit typically involves:
- A letter from FIRS or LIRS. It gives notice of the date and the documents required.
- A review of your books. They’ll ask for VAT filings, PAYE records, financial statements, receipts, and invoices.
- Cross-checking with your bank. Auditors compare your declared income with actual bank flows. If there’s a gap, they’ll ask questions.
- Spot checks. They may verify your suppliers or customers to confirm transactions are real.
The process is thorough. And if you can’t provide consistent, verifiable records, the auditors are legally empowered to estimate your taxes — often much higher than reality.
Why Nigerian Entrepreneurs Struggle
Most SMEs don’t keep proper books for three reasons:
- “I’m too small.” Many believe only big companies need accounting systems.
- “I know my business in my head.” Sales are tracked mentally or through bank alerts.
- “It’s a distraction.” Paperwork feels less urgent than chasing clients.
But the truth is, this mindset is dangerous. Poor records don’t just invite penalties — they block you from opportunities like loans, grants, and investor funding.
How to Avoid the Nightmare
The good news? You can prevent the audit panic if you start now:
- Separate business and personal accounts. Don’t mix them — it’s a red flag.
- Go digital. Scan receipts, track invoices, and use accounting software or even Excel.
- Stay compliant. File VAT, PAYE, and annual returns on time, even if business feels slow.
- Get professional help. An accountant or tax consultant is not a luxury — it’s insurance.
- Build the habit today. Don’t wait for January 2026 when new reforms kick in. Start keeping clean books now.
Final Word
Our client eventually paid his assessment, but the experience scarred him. He told us: “If I had spent half the energy I wasted panicking on simply keeping proper records, I would have saved millions.”
So let me ask you: if an audit notice landed in your inbox tomorrow, would you be calm — or would you be in chaos?
Your answer could determine the survival of your business.
