When you first start a company, it’s a good idea to save receipts for deducting business expenses from your tax return and other. A better system is need in the event that you need to keep track of your books instead of placing all your receipts from business into a drawer at work.
Of course, finding an unorganised pile of receipts can cause chaos. A well-organised set of receipt folder helps business owners track the progress of their businesses as well as prepare financial statements. It can also help identify the sources of revenue, keep track of expenses and can be use to prepare tax returns.
Receipts Are Important Are They A Myth?
A receipt is a piece of paper that can be print or digital form, which confirms that the transaction occurr. Its written evidence that the seller was compensate in cash for a product or service offere to the customer or buyer.
Without the receipt for business and the details it contains and the information it contains, there is no official document of the change of ownership following a purchase or the request for an exchange or refund. There is also no clear evidence of the amount that is due or needs to be paid in case the amount is to be paid in instalments.
Receipts, for example, protect the buyer, the seller and their business from unneeded recourse. They bring much-needed transparency into the transaction.
In this regard business receipts have the following information:
- Information about sellers and buyers: names, addresses, telephone numbers, etc.
- A list of the items and services that are offered
- The breakdown for the cost to be paid: costs discount, coupons, or credits, tax, etc.
- The total amount of the payment
- The payment method employed
Now that we understand the reasons why it’s crucial to keep receipts in order, how do you organise all the little pieces of information in order?
1. Take Note
The first habit you need to start (especially in the case of trying to organise your receipts to pay tax purposes) is to create a tiny note of the reason for the purchase upon the receipt. If you write the note down as soon as you can or schedule a time to do it at the end of the week, day or when a set amount of purchases is complete (at the conclusion of a business excursion, for instance)
You’ll want your purchases for the door card holder to be fresh to your brain so that you can identify them appropriately. Make sure to write your note with a format that allows you to identify the expense quickly later. Just writing “dinner” isn’t enough to trigger your memory when you’re audited one year later.
However, a note such as “Dinner Meeting with Apex Inc.” is an obvious indicator of an expense for your business no matter how long gone by. If the expense is evident or frequent, such as the purchase of monthly stamps and printer paper for office use a note might not be required.
If however, you find personal and business expenses that are included on your receipt make sure to highlight or underline the business expenses, and then note the total separately.
2. Go Paperless
Many people find that a large part of the frustration associated with collecting receipts is organising, filing, and storing the various pieces of paper. Therefore, avoid the heavy accordion boxes and files by organising your receipts online.
There are many options for making the switch to green. There are a few comparatively cheap receipt scanners in any office supply store and you can also snap a picture of the receipt using your smartphone (and email it to your awesome virtual assistant to help organise it for you! ).
Make sure you take an image of the receipt in its entirety and make sure you can clearly be able to see the date, the address of the business and the total amount of purchase. Electronically storing receipts will protect you from the risk of damage or faded ink which renders the receipt unreadable.
They are also easier to search since they can be well-labelled on your computer according to year and/or class. You can then search for or print out those you require and keep the files for as long as needed. Be sure to back up all your data in the event of computer crashes or viruses. You can also take advantage of other cyber threats.
3. Categorise
Once you’ve gather all this information and have it organised, the next step is to get it organise according to the category. That will allow tax filing effortlessly, and will enable you to refer to any transaction without having to search through a myriad of documents. Here are a few examples of the most common categories that can be use to deduct tax-deductible purchases
Advertising and Promotion
Included are items like receipt holder, mail lists or mailing lists software brochures, branded giveaway products, poster, websites development, design and maintenance
Food and Entertainment
Check to see if they are list under travel, if they’re part of a business trip. Also, be aware that this section is heavily examine by the IRS. IRS
Travel
There are specific criteria that you must satisfy when travelling expenses are to be deduct however, some of the things that could be considere to be deduct are travel, baggage and transportation, auto expenses, actual cost or the standard mileage such as parking, tolls, taxis, rental accommodation or meals, dry-cleaning and telephone/internet tips
Rent
This can comprise rent payments on property utilise in the running of your company, lease payments for equipment use by your business or any other amount that is due to be paid to end the lease early
Communication
This could include internet access costs, phone charges and cell phone charges. The IRS closely scrutinises items within this category. Therefore, make sure that you only deduct only what you use for business purposes.
Supplies
It could include materials that are use to create services, office equipment including cleaning supplies including coffee, bottle drinking water as well as food for clients. off-the-shelf software
Insurance
It could include business insurance as well as property insurance premiums. the cost of disability, workers’ compensation premiums for employees.
Licences and Dues
May include business licences, professional licence fees, trade association dues, franchise fees
The Advantages Of Keeping Receipts
Recipients keep track of your small-scale business. It’s as simple as that. However, to maximise the value of your business receipts you need to take it an extra step and keep track of the receipts. By doing this, you will be reward with even more benefits including the capacity to maximise the expenses you record.
The saving of door hangers for business will help you to be more efficient and transparent regarding your accounts and reports at the conclusion of each quarter or the year. This means you’ll be able to obtain financing with greater ease as needed, control the changes in your budgeting and also help your savings.
What’s The Bottom Line?
Once you’ve figured out the importance of keeping receipts and records, which receipts should you save and what information they should have, your records and final report should be more precise than they ever were before.
In addition, when you make use of AI-driven expense management technology, you’ll benefit from more efficiency and a better organisation. In this way your financial documentation and reporting will yield the most advantages for your small-scale business or your household.
It’s been prove scientifically that it takes only two months to establish a habit. So begin your journey to organised peace of mind now. The future you will be grateful for it!
