The paperless world is here, and while we can welcome it, there are pitfalls. Receipts are one of those pitfalls. By receipts, we mean those little pieces of paper one gets in exchange for money when one purchases something, such as gas or office supplies or materials or whatever you pay for in the course of spending money on your business.
What do you do with your receipts?
Do you file them away neatly by month or category? Do you attach them to your credit card statement when you receive it, which you file neatly away after reconciling? Do you take a picture so you, or someone else, can categorize and file them on your computer or online? Any of these methods work well, but the last few more so because the paper receipts fade with time.
The IRS might ask to see them, should they ever come for a visit. The likelihood of that happening is another topic altogether, but when they do come they will want to see some of them. Which ones is a mystery, so best to have them all.
Credit card statements and bank statements are worthless in this respect, mostly because they don’t tell you anything. They say when and where, but not why, and it’s the why that really matters. Did you spend fifty bucks at Office Depot because you needed toner for your printer or because your child was headed back to school and needed supplies? Did you buy a bottle of aspirin for your headaches or because every client that comes to see you needs a couple? Not only will you want to annotate that on the receipt, but you may also want some help with your customer service skills.
No one likes keeping track of receipts, except perhaps accountants and auditors, but it’s a necessary part of making sure your business is in compliance, and of ensuring that if you’re audited, you have the answers to the inevitable questions right at hand.