Everyone is familiar with the question, ‘Would you like a receipt?” when making a transaction. While it can be tempting to decline and so free up your wallet or purse from all those little bits of paper, when it comes to business expenses, keeping receipts is crucial for all kinds of reasons. From tax returns to employee expenses, receipts are important pieces of evidence to help you keep track of business spending and to deal with it appropriately.
Receipts can, however, become overwhelming if left to pile up, or if they are not filed and recorded properly. Here are five fail-safe ways to help your small business stay on top of its receipt recording.
1. Go digital
In this age of internet technology and online storage, we are seeing more and more business functions go digital in order to do away with cumbersome manual data entry and the need for vast storage facilities for endless paperwork. Receipt sorting is one area where investment in digital tools, such as a receipt-scanning app, can really save small-business owners hours and hours of wasted time and possibly even cut down on rental cost for office space or archiving facilities.
Tools such as Receipt Bank allow you to take photos of your receipts and upload them, via the app, on your smartphone or tablet, to synchronize with your accounting package. You can take the photo immediately or when you get back to the office. Receipt Bank scans the numerical data on the receipt and cross-checks it with previous scans to remove any duplicate receipts before adding the new data directly into your accounts software for future filing, expense management and tax assessment.
2. Sort receipts regularly
While digital scanning does away with the need for lots of manual data, it is still important to take time out regularly to sort through your receipts, both paper versions and scans, to check that you have recorded the ones that need to be added to your expenses data and discarded those that you either don’t need to keep and record, or are personal rather than bona fide business expenses. Work out which receipts have been generated through business spending carried out by yourself and which are from your employees, freelancers or other suppliers who need to be reimbursed.
Set aside a regular slot on your calendar to dedicate time for this — don’t let it get squeezed out by meetings or other events unless you absolutely have to. Have a folder, in-tray or even just the lid of a cardboard box to empty your paper receipts into every time you return to the office. This enables you to offload them from your wallet or purse regularly and know where they are. Even if you are using digital receipt-scanning software, check your receipts to make sure you have scanned everything correctly before throwing anything away.
3. Categories are king
We all find it much easier to stay on top of things when we have to tackle only one small piece of the larger puzzle at a time. Try to get into the habit of noting down on each receipt or invoice which part of the business or expenses category it belongs to. Examples could include food and drink, entertainment, travel, or stationery, or larger expenses, such as IT equipment or office furniture. Then, scan each category in turn and file it away accordingly. Your accountant or bookkeeper will love you for it!
Dividing your receipts into groups according to the type of expense like this is a great way to keep on top of them and to make sure that you are not spending too much in one particular area. It is also a prudent habit to get into if your business has several strands or different services that need to be accounted for in turn. Alternatively, you could categorize receipts by employee, geographical region or level of spending if these systems work better for your individual business. The main thing is to sort into smaller groups to make the overall job easier to tackle.
4. Cross-check like a boss
While Receipt Bank offers high levels of accuracy when it comes to expenses data, it is also a good idea to cross-check your business spending against your bank statement, credit or debit card records, and, if you still use them, your checkbook stubs. This gives an added layer of protection and information to ensure that your accounts are in order.
You can ask your accountant or bookkeeper to do this if you don’t have time, or you can check as you go, logging into your online banking at the end of each working day to get an up-to-date picture. Remind employees and suppliers to scan their receipts as soon as possible after obtaining them and to cross-check their own bank and card statements for details of both their own payments on behalf of your business and your expense reimbursements. Try to avoid cash transactions wherever possible, as these don’t allow for this level of cross-checking.
5. Watch your deadlines
Finally, as with any business function, keeping a close eye on your deadlines is crucial when it comes to managing your finances. First of all, note down in any tax-assessment deadlines, adding in written reminders a few weeks in advance to allow yourself plenty of preparation time and so avoid any last-minute panics. Include any Pay As You Earn and salary payment dates too, along with regular meetings with your accountant or financial team.
For regular payments, or larger expenses that you are anticipating well in advance, such as travel, trade-show fees, hotel accommodations and business insurance, make a note of when these are due to be paid so that you can budget accordingly and not get caught by surprise. Using Receipt Bank not simply as a receipt-scanning tool but also as part of your accounting records, linking it to your accounting software, can help you with your financial forecasting.