Owning a business comes with a large set of responsibilities, and while taking care of them, make sure you don't forget to organize your receipts.
Organizing your receipts is all about maintaining a thorough record of your business receipts – the account of every expense you have incurred to run your business. It's not just about taking all the paper receipts and clipping them together. You have to sort them out based on date and purpose, attach a note detailing the expenses, and make sure the records are easily accessible.
In this article, we are going to delve into the best ways to organize your receipts, so you can be stress-free during tax season.
Maintaining business receipts is important because firstly, it helps you get a clear picture of your expenses, and secondly, because you can claim deductions on your business expenses. Be it office supplies, electronics, money spent on meetings, meals, and travel, all of these expenses are tax deductible, provided that you can produce receipts and show that they have been incurred for business purposes. And thirdly, when you have a proper record of all receipts, it becomes easy for your accountant to file taxes.
This is an area where you have to be extra careful. You might feel preserving the receipts is enough, but it's not. You also have to show that the expense is related to your business. This is where notetaking comes into the picture. Attach a note detailing the nature of the expense to your receipt, and make sure to repeat this process for every receipt. So in case there's a tax audit, you'll be able to recall quickly where you spent money, and how it's related to your business.
Even though we're living in the peak digital age, you can save your physical paper receipts to stay on the safe side. Put every receipt into individual envelopes. Invest in office supplies like files and folders, and keep the receipts securely organized. You can keep a separate file for every month with proper labels, so the receipts are easy to locate whenever required.
This is a method applicable for both paper receipts and digital receipts. For paper receipts, you'll have to scan the documents and the notes and add them into a digital folder. Make sure the name of the folder aptly represents the nature of the receipt, so that when needed, you can fetch the details quickly. If you own multiple businesses, or your firm operates from multiple locations, maintaining receipts through software is the best solution to keep things error-free and organized.
While organizing your receipts, you have to build a system for you and your team members/employees to follow. For example, there has to be a set time frame for entering your receipts into the digital system – it could be weekly or monthly, depending on your convenience. If you use any particular software, make sure everyone else working with the receipts is aware of how to enter information into it. And once you have this system in place, make sure you follow it to the T, without fail.
Just because you're done with your tax filing for the year, doesn't mean you can throw away the receipts or delete them from your system. You never know when you need which receipt, so the best solution is to follow the IRS and maintain all business receipts for 7 years. For the physical copy of receipts, make sure you store them in a safe place to avoid them being torn, damaged, or misplaced. As for digital receipts, don't delete your old records, and store them in a secure folder, sorted based on year.
At Accountants Now, we are here to take the headache out of taxation. Our experts will help you keep your business receipts organized and make sure you take advantage of every applicable deduction. From payroll, bookkeeping, to filing taxes – our services are designed to assist you to run your business seamlessly, while we take care of the financial aspects. For more information, feel free to contact us.
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