“Would you like a receipt?”
Using your finger to magically sign your name on an iPad is becoming just as common as using a pen to write it. You can then get a receipt teleported to your electronic mailbox. Pretty cool, huh?
Whether evolving retail standards and technology is convenient or a nuisance, it doesn’t change the importance of having receipts and trails of your business activities.
Why So Serious?
A single receipt can save your company hundreds or even thousands of dollars.
It’s no magic trick.
Deductions need to be traced back to where an expense occurred. The IRS requires receipts over $75. If you purchase a $2,000 computer or take a business trip across the country and don’t have any receipts for costs, you can’t deduct them as business expenses!
A missing receipt could cost your company money and put you at risk for an audit.
Does is Have to Be a Receipt?
Okay, so you know having a record of a purchase or expense is important, but does it really have to be a receipt? Online banking allows you to see every transaction you’ve made for years by logging into your account.
Is this good enough, or are receipts absolutely necessary?
As mentioned above, transactions over $75 must be recorded. In certain categories, including travel, meals, and entertainment, you may be held responsible for not tracking even smaller amounts due to suspicion that you’re abusing the reporting system.
You should be keeping your receipts and recording their relation to your business. For example, some of our clients will write “donuts for team meal at 2016 national conference” or “client dinner for new account” on their receipts to trace back expenses and make sure they are properly credited.
Kahuna Accounting uses Xero cloud accounting software to manage the bookkeeping side of small businesses and law firms. With Xero’s app, our clients can take a snapshot of a check or receipt and send it to their Xero account, where our team can use it to create invoices to reconcile with transactions.
Unmatched transactions are easily matched and deductions can then be traced back to the specific receipt. Take a receipt and attach to an invoice – When the transaction comes through the bank or credit card, it matches it to the general ledger, which is where reconciliation takes place.
Better safe than sorry applies to keeping your receipts, but having a proper accounting system in place for your business takes a lot more than a shoebox full of paper.
Need help cleaning up your accounting mess and to learn how to put an efficient accounting system in place to make your job easier and your business grow?