These are an acknowledgment of arrangements being done between two parties in consideration for monetary benefits. Consumers generally receive receipts from vendors and service providers from their business dealings.
Business receipts need to be documented and recorded as per relevant laws and regulations like the Companies Act, Tax regulations, etc. Furthermore, the period of reservation would depend on the size and nature of the business. Typical business receipts include :
- Cash and credit sales receipts, invoices
- Purchases of raw materials and bills of lading/transportation.
- Cash register receipts
- Petty cash slips for small payments made in cash.
What receipts need to be kept?
Business receipts need to be kept to comply with laws. There are various requirements as per different laws. However as per IRS(Tax Authority of USA), “Good records will help you monitor the progress of your business, prepare your financial statements, identify sources of income, keep track of deductible expenses, keep track of your basis in the property, prepare your tax returns, and support items reported on your tax returns.”
This particularly does not outline the exact requirements of what and how much. However, one can gauge out the requirements based on industry standards and try to comply with laws.
The business receipts related to following items are mandatorily to be reserved:
- Other expenses
- Car and truck expenses
- Professional services
- Tours and travel expenses
How long to preserve records?
IRS goes back to six years at best. However, audit laws sometimes go back as much as 8 years. So, it would be only prudent to preserve records going back 8 years.
Ways to organize business receipt:
Businesses should try to create better filing and recording systems in order to cope with organizing business receipts.
A small business may not need an elaborate system but scaled up businesses need to have a system to better record the receipts and find them whenever necessary. Here are effective ways to organize business receipts:
1) Go paperless
Paper recording will require large spaces and it will be costly for any business regardless of its size. The businesses should therefore try to go paperless right from the beginning. However, certain aspects of the business need to be done in physical papers like contracts.
These need to be digitized immediately. Further, paper records should also be kept as there is no other way. The business receipts can be modified and electronically stored.
2) Invest in supplies
The various supplies help the ineffective organization of receipts. These supplies include investment in files, folders, software applications, and storage. These supplies help in the categorization of documents.
The business receipts for example can be categorized alphabetically or chronologically. Small businesses can use envelopes instead as records are low. However, every business needs to label these supplies effectively.
3) Digital storage and use of software
The software applications are very useful in digital storage and automation of regular works. Businesses need to back up digital receipts in order to lose financial records. The scanners can be used to convert paper records to digital.
Various software applications are readily available. For example, QuickBooks is used to record accounting records and receipts and can be used to back up these records as well.
After making the above steps, the important aspect of organizing business receipts is to organize them by category. This helps to save time and allows the user of records to refer back to old records without any hassles. The following are the categories generally used for tax and business purpose in the filing, storage, and retrievals
- Tours and travel expenses: These include expenses meeting tax-deductible for travel expenses such as airfare, baggage, and shipping, actual expenses, toll expense, meals during travels, etc
- Advertising and promotion: This shall include expenses for business cards, mailing lists, preparation of brochures, website designs, development, and maintenance.
- Professional Fees: This shall include receipts related to accountant’s fees, bookkeeping fees, attorney’s fees, other professional consultants’ fees directly related to business
- Charitable contributions: These are tax-related records. These are contributions by a specific corporation to a qualified charity that can be deductible as business expenses.
- Purchases and sales receipts: These are related to daily business transactions made during the period. Purchases of raw materials and sales of finished goods are the thesis of the records here. These help in timely payment and inventory management.
- Training expenses: Often taken as education expenses, these are tax-deductible expenditures. The businesses shall therefore categorize expenses relating to the training of employees, education of internships, costs related to internships, as training expenses.