You’ve heard it over and over again from your bookkeeper or accountant: keep your receipts, take pictures of your receipts, save your receipts. But have you ever wondered why they emphasize this so much? What is so important about receipts as a business owner?
Record keeping is the heart of bookkeeping and a big part of that is receipts. Receipts let you know what you bought and when, allowing you to track your expenses. This obviously helps when you have a budget, but especially to protect yourself in the event of an audit by the IRS. When you have receipts attached to your expenses, this offers more proof that everything is authentic.
Ok, but what is the best way to go about this?
You could go the old-fashioned route of keeping your receipts in a shoebox, or even better, filed away in a cabinet based on expense type. That is honestly the easiest and cheapest way to get started. The only drawbacks is that it’s time consuming and the ink on the receipts will fade over time. Also, the more years your business is open, the more receipts you will collect, leading to a problem of storage.
The next best solution is to scan the receipts onto your computer as soon as you get them, or as quickly as possible so you don’t forget what the purchase was for. You can then store the receipt files either directly on your computer or on a Google/Dropbox file. The advantages for this is that you don’t have to worry about ink fading and it can be quite easy to find the receipt you’re looking for with a simple search feature. Unfortunately, the bigger your business gets or the more years you put in can mean that eventually you would have to purchase more space. Other than that, this is a really great way to store your receipts and can even work as a backup for the upcoming solution, which is my favorite.
I always like to say, if you’re already using something, why not use it to its fullest potential. Quickbooks Online has a Receipts feature that, when tied to the Quickbooks app, makes receipt capturing a breeze. Let’s say you head into Home Depot for some supplies. Once you finish, you head to your car, open up the app, tap the Receipts option, snap a picture, and, boom, your receipt is uploaded to your Quickbooks. Even better than that, it will sometimes automatically match with the expense when it comes through the bank feed. All you have to do is go through the Receipts tab to make sure the receipts are matched with the correct expense and you are good to go. You can even send your receipts through your email directly to Quickbooks Online and they’ll show up in the Receipts tab!
By using the Quickbooks Online option, you’re able to not only look up the receipt, but also make sure that it has been entered correctly. And if you’ve every forgotten what an expense was for, you will be able to double-check with the receipt because it’s attached to the expense. Even better, there isn’t a limit to the number or size of receipts uploaded. A win-win on every point!
No matter which option you choose, it is still important to keep up with collecting and storing receipts. The chance of being audited is about 1 in 250 returns, but that number goes up the more income you make. Protect yourself by starting the habit now, no matter what size your business is.
Do you keep your receipts? Let me know in the comments what your process is!
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