The Importance of Keeping Receipts
It’s a “finders keepers” world. Keep your receipts to ‘find’ out how to better your bottom line, and avoid ‘weeping’ when the taxman pays his annual visit.
The Importance of Keeping Receipts
Understanding your financial foothold involves a little more than opening your coffers and peeking at how many Lincolns and Benjamins protrude. After all, it takes more than a single snapshot of any given moment to truly determine any individual or business’ profitability, or lack thereof. Want to truly remain on top of your money, how it’s earned and how it’s spent? Stay on top of these small but significant documents… your receipts. This because the importance of saving receipts is about more than mere storage. It’s about balancing your budget and making sure everyone receives exactly what they’re owed.
These digital copies containing your transaction information tend to be painted as a nuisance. However, they’re the cornerstone of expense management, and should not be overlooked.
Here’s what you need to know to keep better records and please the IRS.
The importance of receipts – Is it a myth?
A receipt is a document, either in print or digital form, that confirms that a transaction took place. It is written proof that a seller received monetary compensation in exchange for a product or service provided to the buyer/customer. Without the business receipt and the information it contains, there is no official record of the shift in ownership following a purchase, or a request for a refund or exchange. Nor is there clear-cut evidence of how much has been or still needs to be paid, in the event that the fee is to be transferred over in installments.
Namely, receipts protect both the buyer, the seller, and their business against uncalled-for recourse. They inject much-needed transparency into the transaction.
For this purpose, business receipts contain the following details:
- Information about the buyers and sellers: names, addresses, phone numbers, etc.
- A list of the goods and services provided
- A breakdown of the fee paid: prices, discounts, promotional codes or credits, taxes, etc.
- The total amount paid
- The method of payment employed
Should you keep your receipts?
Saving your receipts – it’s not just something your gran does that everyone laughs about at family gatherings. In fact, there are actual, logical, and legal reasons why you need to store and track your business and personal receipts.
Should you hold onto receipts for business expenses?
Maintaining a record of your small business’ activities is critical to your company’s survival and success. Recordkeeping serves as a window into your business’ evolution within its industry and market. It helps you understand which sales and marketing strategies are working. In addition, tells you which products and services are selling. It explains how customers prefer to pay for your offering, and more. It also sheds light on areas within your business in need of a helping hand. Business receipts additionally serve as the foundation for your financial statement and tax return preparation. They’re the little initial investments that save you and your small business big time in the long run. So, if you want to remain in the IRS’s good books, start keeping receipts!
Why should you store receipts from personal expenses?
Should you save receipts from your personal purchases as well? Of course! The receipts you are presented with after purchasing a product, like a new oven, or contracting a professional’s services, are your ticket to a hassle-free refund or exchange. They are the only proof-of-purchase many companies accept when you want to cash in on a warranty. Receipts can also be used by some companies for price-matching purposes. Furthermore, they will help you figure out your tax deductions when “that time of year” rolls around once again.
The benefits of keeping receipts
Keeping receipts benefits your small business. It’s just that simple. But to truly maximize the benefits of your business receipts, you must go one step further and track them. Doing so will provide you with even more advantages, such as the ability to make the most of the expenses you claim. It will also help you identify if you are liable for paying taxes, so you can pay the exact tax payments you are required to make -and not a penny more or less. It can even reduce your tax obligations. Saving business receipts will also promote greater efficiency and transparency with respect to your account and report preparation at the end of each quarter or year. This way, you’ll be able to secure financing with greater ease when needed, manage changes within your budgeting, and help your nest egg grow.
Ready to get started? Use an automated expense management platform, like WellyBox. You’ll be able to scan, store, and keep record of your receipts. With WellyBox, you’ll see start enjoying these benefits with minimum effort on your part.
Which receipts should you keep for tax purposes?
Do you really have to save every receipt of every expenditure for taxes? No, you do not. But which receipts should you save to comply with the IRS? Which can you part with, to help your bookkeeping remain clear and concise?
Whether you scan your paper receipts, store digital ones, or a bit of both, it’s important to learn which receipts are short-term keepers, and which ones are to remain in your possession for long-term, tax-related reasons.
For the short term
These tend to be receipts from small or inexpensive personal expenditures, such as a new sweater, or dinner on the town. Once you’ve cut off the tags and logged your expenses in your budget management system, you can confidently pitch these receipts to the curb.
For the long haul
The more expensive your personal transaction is, the more likely you are to benefit from holding onto your receipts even longer. This, in case the warranty needs to be enacted (with the receipt serving as proof). But long-term receipt storage is even more critical when it comes to business expenses and tax purposes.
Do you own your own business? Records pertaining to unreimbursed work-related transactions, self-employment expenditures, donations, and even childcare and medical expenses, can be used for tax deduction purposes. Be sure to hold onto all business expense receipts for seven years, in case you’re audited.
For more about taxes and receipt storage, consult the local tax authorities in your home country.
What’s your bottom line?
Now that you understand the importance of keeping receipts, which receipts to save, and what they should contain, your records and your bottom line should be clearer than ever before. Even better, when you leverage AI-driven expense management technology, like Wellybox, you’ll be afforded increased seamlessness and organization. This way, your financial documenting and reporting generate the greatest benefits for your small business and your family. The WellyBox system puts an end to chasing down invoices and receipts. Instead, WellyBox will locate all of your digital receipts and invoices, and sync with popular cloud storage solutions, like Dropbox, QuickBooks, Xero, Freshbooks and more. The result? Instant visibility of status updates on your expenses (in multiple currencies), and supreme security that ensures your sensitive information is never shared with third-party services.