As a small business owner, maintaining receipts is very important in tracking your success. A receipt is proof of payment. Proper receipts will help you solidify your finances by providing a record.
You need good records to monitor the progress of your business. Records can show whether your business is improving, which items are selling, or what changes you need to make. The main purpose of having proper receipt management is to safeguard the records of the purchase. The Importance
You need good records to prepare accurate financial statements. These include income (profit and loss) statements and balance sheets. These statements can help you in dealing with your bank or creditors and help you manage your business.
You need good records to prepare your tax returns. These records must support the income, expenses, and credits you report. Generally, these are the same records you use to monitor your business and prepare your financial statement.
Receipts are also necessary to keep track of how much money has been spent by the business in a specific time frame. This information can be used during disputes concerning expense reports or other financial matters. Keeping receipts of all your transactions will also help you claim all of your possible tax deductions.
Maintaining receipts will also help you identify if you are liable for paying taxes. You must keep your business records available at all times for inspection by the IRS. If the IRS examines any of your tax returns, you may be asked to explain the items reported. A complete set of records will speed up the examination. Be sure to hold onto all business expense receipts for 7 years, in case you’re audited.
Saving business receipts will also promote greater efficiency and transparency with respect to your account and report preparation at the end of each quarter or year. This way, you’ll be able to secure financing with greater ease when needed and manage changes within your budgeting. Whether you are filing taxes, going through an audit, or applying for a small business loan, you will need to have supporting documentation for your expenses.
Keeping receipts benefits your small business. It’s just that simple. But to truly maximize the benefits of your business receipts, you must go one step further and track them.
How To Track Your Receipts It’s easy to lose a piece of paper – especially when you have lots of other loose documents floating around. Using file folders is an age-old method to stay organized and can be effective. However, using an application like Expensify or Hubdoc can be more efficient.
These applications can range from free to a very low cost, all while providing you with numerous options on how to virtually store physical receipts you receive and those that are virtual.
If your business uses cash, you will be facing some challenges. Cash is hard to track, easy to spend, and nearly impossible to reconcile with receipts. We recommend using debit and credit cards; they provide you with monthly statements that can be easily married up with your receipts.
But honestly, it is 2021... so rather than stuffing all of your business receipts into a desk drawer. You can use automated receipt management software. You’ll be able to scan, store, and keep a record of your receipts.
Most of them work roughly the same way. You download them onto your phone, use them to take pictures of your receipts, and then the app’s technology will store digital versions of the receipt and file them away into an organized filing system. Digitizing your records is also a great way to avoid accidentally losing them or tossing them in the trash.
Plus, let’s not forget that paper records can fade, and are susceptible to damage. Telling the IRS that “the dog ate my tax records” simply won’t fly.
There are many different options on the market, with different features, and at various price points. Take the time to research a few and pick which one works best for you. Some of the popular ones include Quickbooks, Expensify, Smart Receipts, Zoho, NeatFiles, ShoeBoxes, and Waze (this is the free one). Whether you decide to stuff your receipts in a drawer or upload them to an app, stay on top of them! You definitely want to save your receipts for larger purchases but it is just good practice to save your receipts for the smaller ones as well. If you are not sure which receipts to save visit the IRS website, for a quick list of records to maintain!