For business owners who use their own funds to buy items for their business, it is surprisingly common for some to not realise that they need to keep the receipts. Many of these receipts are for tax deductible purchases that business owners can still claim. It is common in small businesses to make these purchases, however throwing away those receipts is as bad as burning cash.
To ensure that you get your receipts organised and ready for tax time there are steps to follow that will make the entire process easy. In fact, at the end of these steps your entire bookkeeping process could be transformed. Here are our 5 steps to making it easy to save receipts.
1. Save the receipts
The first thing you should do is actually save the receipt. Don’t throw it out. After you have made the purchase separate it from any personal expense receipts. Store it in a folder or box for now to keep it safe. This way when it comes to actively completing your bookkeeping process these receipts will be stored safely in an accessible location for you to easily reach.
After completing this step, you will be taking your first leap into a world of better bookkeeping.
2. Make copies
A simple step that could save you a major headache. Make copies of your receipts. If anything happens to the original, then at least you have a copy. While we will soon be discussing digital bookkeeping where you can create digital copies of your receipts, for now just taking physical copies will save you some potential headaches.
3. Organise your receipts
Once you have saved and made copies of your receipts it is time to organise them. Begin by separating them into organised groups based on whether the purchase was made via: Credit card, cheque account, savings account or cash.
Next you should attach each receipt to their respective bank statements. This will make the bookkeeping process much easier. For cash, group those receipts together in an envelope marked cash. This will help your bookkeeper see that they are not connected to a bank statement.
4. Scour receipts for business expenses
While you are organising your receipts, you should begin scouring them for any items you believe are business related. Mark them with a highlighter and take note of any that may require special attention. You should also mark items that could be business related even if you are unsure. Your bookkeeper will be able to advise you on what is and is not tax deductible.
5. Use a bookkeeping software like Xero
To really make your entire receipt management process easy switch off of your paper bookkeeping and on to digital. Cloud based bookkeeping software will allow you to complete all of the previous four steps easily, in the cloud. It could even automate some of the process. You should talk to your bookkeeper about switching to Xero. Once on the platform you can store all your receipts in the cloud and use Xero to separate these business expenses with your bookkeeper in real time. It makes bookkeeping much faster and easier.
Saving your receipts from business purchases made with cash or other personal accounts could help your business’ cash flow. There could be many potential deductions you could claim come tax time. Taking steps to save your receipts whether manually or digitally will allow you to make these claims easily.
If you need help managing your bookkeeping talk to Link Strategies today.