What Is Receipt Management And How Important Is It To Your Organization?
Receipt management involves retaining, storing and tracking business receipts. Receipts are generally issued to document the purchase of goods or services.
The IRS requires receipts as proof of expense transactions during an audit. The retention and organization of your receipts can make the audit process run smoothly.
“It is important to keep all documents used to complete your tax return. The documents kept should include records supporting the income, expenses, deductions or credits you claimed, such as invoices, receipts, mileage logs, and checking account statements showing amounts paid, and any other proofs of payment. The records should be well-organized to answer any questions when your tax return is selected for audit. The records supporting items on your tax returns should be kept for at least three years after filing your tax return.
When your tax return is selected for audit, you must send copies of your records that show the gross receipts and business expenses claimed on your Schedule C.
* Gross receipts are the income from your business. Proof of your gross receipts includes cash register tapes, bank statements, bank deposit slips, receipt books, sales invoices, credit card charge slips, Forms 1099-MISC and/or Forms 1099-NEC.
* Business expenses are the costs paid to carry on your business and proof of your expenses includes canceled checks or checking account statements which clearly show the expenses paid, cash register tapes, account statements, credit card sales slips, and invoices.”
It is important to create and continually follow a procedure for your receipt management. Receipts may be stored either manually (physical, hard copy) or electronically/digitally (attached to transactions in your accounting software). In addition, there are receipt management software applications that also aide in the storage of receipts. The receipt is either scanned in or a photo taken to be uploaded and stored in the cloud or integrated with accounting software.
Whatever method you choose to use for capturing and retaining your receipts, it is suggested that you name the receipt file (i.e. pdf) with the date, vendor name and receipt dollar amount in order to quickly locate it, if necessary. This also holds true when uploading receipts in order to sync with the correct transactions in your accounting software.