As a small business owner, keeping track of receipts can feel overwhelming, but understanding how to manage them is crucial for your financial health. In a recent conversation with Patricia, a small business owner, we discussed the importance of receipts and how to handle them effectively. Here’s what we covered:
Why Are Receipts Important?
Receipts serve multiple purposes in your business:
Tax Deductions: To claim an expense as tax-deductible, the IRS requires you to have proof—this is where receipts come in. Keeping accurate records can save you from complications during tax season or an audit.
Financial Records: Receipts help maintain accurate financial records, enabling you to track expenses and manage your budget effectively.
Do You Need to Keep Every Receipt?
A common question is whether you should keep every single receipt. While it might seem prudent, you can simplify your record-keeping by following some guidelines:
General Rule: It's widely accepted that you should keep receipts for expenses over $75. This helps you avoid the clutter of minor receipts that don’t significantly impact your finances.
Exceptions for Larger Businesses: If your business is growing and you have employees, you might want to establish your own internal policy. Some companies track expenses over $20 or even $10 to maintain oversight and prevent inflation of expenses.
The Role of Accounting Systems
As your business expands, consider investing in accounting systems and hiring professionals who can help manage your receipts and overall financial health. This will ensure that you can track expenses efficiently while allowing you to focus on what you do best—running your business.
Conclusion
Keeping track of receipts doesn’t have to be a daunting task. By understanding the rules around what to keep and why, you can streamline your accounting processes and prepare yourself for a successful financial future.
For a more in-depth discussion, check out my video where Patricia and I delve deeper into this topic.
Watch the video here:
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