Running a small business means keeping track of many financial details, and one of the most important is organizing your receipts and invoices.
Good record keeping not only helps you understand where your money is going, but it also makes tax preparation easier and protects you if your business is ever audited. With a few simple systems, you can organize your business receipts and stay on top of your expenses without adding more stress to your busy schedule.
Serving customers, building relationships, networking, paying bills, sending invoices, and managing employees is the life of a small business owner. With so many moving parts, it’s easy for small details to slip through the cracks. That’s why having a simple system to organize your business expenses and receipts is so important.
My husband and I owned our restaurant in the days before phone apps, cloud storage, and doing many tasks online. I had to keep track of paper receipts and bills. My favorite tool was an accordion file. It had a pocket for each month. When my produce supplier made his twice-a-week delivery, the invoices went into my accordion file. When I paid the window washer, the receipt went into the file. When I paid a bill for the business, I wrote the check number and date paid on the bill and slid it into the file. At the end of each month, I totaled my expenses by category and entered them into a spreadsheet. At the end of the year, all my receipts were in my accordion file so that I could easily verify my expenses. Then the receipts went into a manilla envelope to be saved in case I needed them in the future.
Today, there are alternatives to mailing invoices and writing paper checks, which make record keeping easier. Yet, many business owners still find it challenging to keep track of their business receipts. Below are some easy tips to help you keep your business receipts and invoices organized. In my next blog, I will look at some apps to help even more.
Have a designated place for receipts and invoices
Many organizers recommend that you have three designated receptacles, such as trays, baskets, or folders, in which you put important papers until you have time to deal with them. One tray would be for bills that need to be paid, one for completed work that needs to be invoiced, and the third for documents to be filed. As soon as documents are received, whether through the mail or delivered in person, they should be reviewed for correctness and then placed in the appropriate repository until you are ready to pay bills or send out invoices. Upon dealing with these items, the supporting documents should be put in the “file” tray until you have time to file them.
Set up online folders to store receipts and invoices that are sent digitally
Many of your suppliers will send you invoices via email or text that allow you to simply enter your payment information. Save these receipts in digital files. To eliminate the need to keep paper receipts, you can scan them and add them to your digital file system. Scan apps for phones can make this an easy process. As an alternative to scanning, you can snap a picture of your receipts and store the pictures. Scanning receipts also helps to protect their legibility, so you can read them clearly in the future.
Setup Auto-Pay for Regularly Occurring Bills
Most banks make it easy to set up automatic payments for regularly occurring bills. Some companies, such as utility companies, will send the bill to the bank. You should down load the bill for your records, however, as the bank may not store the bill long-term. Banks must store payment records for several years, but they are not required to store invoices. Make it a habit to download the bill at the time you authorize payment. Store the invoices in the digital files you have created on your computer.
Schedule Time Regularly for Bill Paying and Invoicing
Set aside time each week, or more often, to pay bills and send out invoices. It is important to put this on your calendar and commit to keeping up with these tasks. Scheduling time on your calendar helps you to build habits that ensure that your bills get paid, your invoices get sent out, and your records are kept up-to-date. In the long run, this habit will save you money and reduce your stress.
Match your receipts with your bank and credit card transactions.
Include time in your bill management schedule to review each bank statement and credit card statement. Match each transaction with your receipts. If you are missing a receipt, the earlier you realize this the sooner you can search for it and the more likely you will be to find it. Keep in mind that if you should face an audit, the IRS will not accept credit card statements. You must be able to produce legible receipts for each expense you deducted on your tax return.
All your business documents should be kept for at least seven years after you have filed your tax return. You should also set up backup storage, in case you have a problem with your computer. You can store your files on an external hard drive or in the cloud.
Follow the steps above to organize your receipts and invoices. It will reduce your stress and save you money on your taxes. Watch for my next blog on apps to make these processes even easier.
Susan's Reflections 
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