When a business is in its early, developmental phases, tracking receipts for tax purposes is no big deal, but as a business grows, it becomes more and more difficult, especially when you factor in all the possible deductions you want to make, such as entertainment, travel, gift expenses etc.). Fortunately, e-receipts make the whole process much simpler, and switching to electronic receipts could help you reap the following rewards:
- Wasting less water
- Causing less harm to the environment
- Easier to keep track of
- Simple to safely store
While switching to electronic receipts has a number of advantages, it’s still important to have some kind of plan when it comes to organizing them, otherwise your computer can become a confusing mess.
What’s required when organizing your electronic receipts?
If you’re still using a POS that’s generating paper receipts, you can make the whole process more streamlined by using a system that defaults to paperless interactions and electronic signatures. This will reduce waste and storage space, and reduce the number of receipts you have to transfer into an electronic format.
Even if you don’t have a POS that issues electronic receipts, you’ll still need to convert hard copy receipts to electronic format to file them. Invoices for inventory, expenses for travel, continuing education, etc. come in all different shapes and sizes.
Luckily, converting them can be as easy as taking a picture with your phone. Just remember to keep the file size in mind to avoid running into problems with your computer’s processing capacity. Wherever possible, try to stick to JPEG or PDF files. Additionally, you could go for an app with OCR (optical character recognition), which renders the text into a format that your computer can then search. Many business owners find this particularly helpful if they don’t use accounting software, since it makes it easier to look for receipts later on.
What happens once you’ve converted to electronic receipts?
The first step once you’ve made the switch to electronic receipts, is to organize them electronically, and many business owners choose the cloud for this purpose, since it can be accessed at any time, and is typically more secure than a hard drive. You can also save them in folders, or using accounting software. Note that there are several different services that can help you store your receipts electronically, such as Google Drive or personal computer files. Just be certain to name your files logically and specifically, with dates where possible, to avoid any confusion and to save time.
When you have a bookkeeper on board, or an accountant (or both), they can help you to store your electronic receipts in a logical, methodical manner, and file them with your tax return, as and when needed. This way you can keep the IRS on your side, and claim all appropriate deductions.
Receipts are an important part of any business, and the quicker you can convert to e-receipts, the better it will be for you, and your business.