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​In Pursuit of Profit

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7/22/2019

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6 Tips for Organizing Business Receipts

 
6 Tips for Organizing Business Receipts
Many business owners struggle with back-end office organization, especially regarding financial items like business receipts. ​The problem is two-fold: most business owners underestimate the importance of business receipts, and receipts are hard to organize manually.  

While it is advisable to keep all purchase receipts – personal and professional – a desire to reduce paper clutter and make the right choice environmentally has many people skipping the receipt altogether or asking for an emailed copy. 
While it is advisable to keep all purchase receipts – personal and professional – a desire to reduce paper clutter and make the right choice environmentally has many people skipping the receipt altogether or asking for an emailed copy. 

​Too often business owners will forgo getting a receipt for a business purchase because they are in the habit of doing so with their personal transactions. Professionally, this is an unwise choice. There are many instances where receipts are an absolute necessity from a business perspective. For instance, expense reports, tax filings, and bank reconciliations all require receipt verifications.  

Opting for digital receipts instead of paper is an environmentally responsible choice when it is properly executed. However, overzealous email marketing has turned many business owners’ inboxes into technological black holes. Too often business owners forget to comb through their emails periodically to enter digital receipts into their online accounting systems. Emailed receipts that go to spam folders can easily be overlooked, while those that are accidentally sent to incorrect addresses can be lost forever. In some cases, duplicate receipts cannot be generated from vendors, partners, and the like, resulting in a stressful situation for well-intentioned business owners. 

When business owners do obtain physical receipts, it is easy to lose them, creating major accounting headaches. However, even when all receipts are present, if they have not been organized as they were acquired, mistakes can result. Expenses can be miscategorized, tax incentives may be overlooked, and cash flow can suffer.  
​
Organizing receipts may not be the most glamorous to-do list line item, but it is certainly an important component for business owners. Use these six tips for organizing business receipts efficiently: 
1.  Let your Accounting Software Do It Automatically 
​The most effective way to organize business receipts is to use software or an app. Most accounting programs have a receipts feature, which allows business owners to automatically import or upload receipts for streamlined accounting. Some even track mileage so that business transportation expenses can be logged automatically without the added hassle of entering individual trips.  

Top-rated business receipt platforms include Expensify, Shoeboxed, Neat, Smart Receipts, Wave, and Veryfi. Once receipts have been entered, they can easily be categorized, viewed, and sorted to aid in financial reporting and cash flow management. Furthermore, each of these provide business owners with a way to enter receipts quickly and export them into secondary applications or send them to tax preparers via embedded integrations.  
​
While most business owners are receptive to modernizing their operations with accounting software, some still prefer to handle business receipts manually. If cost or resistance to change is a barrier to utilizing a software platform for business receipts, more steps must be taken to ensure receipts are properly organized.   
2.  Keep and Notate Every Receipt 
​When receipts are obtained, notate each one with a brief description to allow for better recollection later. Keeping notes is a helpful tip for any business receipt, especially unusual or special-case receipts. For instance, if a non-preferred payment method is used, that should be notated to avoid confusion later when the receipt is reviewed.  
3.  Maintain a Consistent Method of Organization 
Select an approach to organizing business receipts and stick with it. Receipts can be organized by vendor, by type, chronologically, or any other way that is congruent with business operations. If the organizational system being used is logical and intuitive to the people managing it, it can be used. Clearly communicate how receipts should be categorized so that there is no ambiguity among employees. The most crucial element is maintaining the same approach over time to avoid confusion or errors, which is why simpler is typically better. 
4.  Identify Tax Deductions Year-Round 
Do not wait until tax season. Identify tax deductions as receipts are acquired. This practice will ensure that no tax incentives are missed, needlessly increasing the company’s tax burden.  
​
Estimating ongoing tax obligations also provides for adequate time to do additional research or consult with a professional related to tax deduction gray areas. Planning in this capacity can eliminate the need to file an extension while tax research is done at the end of the year to verify possible tax opportunities.  
5.  Train a Backup 
Too often in small businesses and startups limited headcount results in each employee being responsible for multiple roles. This “one person, many hats” approach can eliminate the feasibility of redundancy. However, having redundancy is vital for finance and accounting functions. Training a backup and outlining a backup plan is important in the case of sickness, leave, or turnover. Fundamentally, the financial functions of the business should never rely on a single person because complete autonomy removes the checks and balances that are required in a healthy financial system.  
​
When a third-party bookkeeper or accountant is managing the company’s finances, the business owner should stay briefed on what is being done, why, and how for the sake of redundancy. This oversight is essential regardless of the level of experience that a financial professional brings to the equation.   
6.  Keep Receipts for Tax Purposes 
​The IRS requires that businesses retain receipts for a certain period after filing taxes. The duration varies based on business type and tax filing nuances, so it is crucial that business owners heed official recommendations to avoid being audited or facing tax penalties. 
To avoid data loss in the case of a security breach, theft, or natural disaster all receipt records should be backed up to the cloud. Once receipts are no longer required, they should be discarded securely. 
​ 
You don’t have to struggle with back-end office organization, especially regarding financial items like business receipts. We do not underestimate the importance of business receipts and expenses. We welcome your call or email to let us know how we can help!  
 
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