Effective receipt management is essential for businesses that want to get a clear picture of their spending. Without it, complications can arise and costs can spiral out of control.
In this article, we discuss why receipt management is important, the challenges that come with it, and the best practices that can make it all work.
Key Takeaways
- Receipt management includes organizing, storing, and tracking receipts for business transactions. It involves maintaining accurate records either manually, digitally, or a combination of both.
- Receipt management is important for financial accuracy, tax compliance, spending transparency, audit preparedness, fraud and theft detection and prevention, and streamlined employee reimbursement.
- Best practices include going digital, creating and enforcing collection policies, implementing a consistent filing system, and adding notes to receipts.
What Is Receipt Management?
Receipt management is the process of managing receipts for business transactions. It involves collecting receipts, categorizing expenses, and maintaining accurate records for different business purposes.
Business owners can manage receipts manually with physical storage, digitally using specialized software, or with a combination of both.
Why Is Receipt Management Important?
Financial Accuracy
Proper receipt management ensures precise bookkeeping and reliable financial statements. With accurate financial records, you can make more informed decisions for your business.
Tax Compliance
You also need proper receipt management to claim legitimate business deductions and comply with tax regulations.
The IRS requires documenting reported expenses with receipts, invoices, delivery slips, and other proofs of purchase. Organized receipts can simplify tax preparation and reduce the risk of audit issues.
Spending Transparency
By diligently managing your receipts, you can gain transparency into your business’s spending patterns.
This results in better expense tracking, increased cost-saving opportunities, and more effective budget management and forecasting.
Audit Preparedness
As we touched on earlier, well-organized receipt records make it much easier to respond to audits. Maintaining a clear spending trail with supporting documentation streamlines the audit process and reduces potential complications.
Fraud And Theft Detection
By analyzing receipts regularly, you can identify unusual spending patterns, theft, and fraudulent activities before they become a much bigger problem.
Streamlined Employee Reimbursement
Digital receipt management tools simplify the expense reporting process for employees, allowing them to submit receipts and create reports from anywhere. This can significantly streamline the expense reimbursement process.
The right digital solution can even eliminate employee reimbursement and save field technicians and finance team members time and effort.
Receipt Management Challenges
Volume
A high volume of transactions can make receipt management difficult and time consuming for your finance team.
You can keep receipts from piling up by reviewing submissions regularly so they don’t hinder your team’s productivity and efficiency.
Collection
With manual receipt management, it can be incredibly difficult to collect all the receipts needed for your records. Finance teams often need to remind employees regularly to collect the receipts they need.
Thankfully, digital solutions can help your team gather necessary data at the point of sale so you don’t have to hunt for missing receipts.
Loss
We all know that lost receipts are a headache for your finance team. Lost receipts can also lead to financial discrepancies and other tax-related issues. Digital solutions ensure that receipts don’t get lost on their journey from the cash register to your desk.
Receipt Management Best Practices
Go Digital
Going digital can streamline your receipt management like few other things. One of the most useful parts of going digital is the ability to create and submit digital copies of paper receipts.
The most basic way to do this is to have your employees snap a picture of the receipt and send it to you via text or email.
Some software offers optical character recognition (OCR). OCR extracts information such as date, vendor, and dollar amount to create a complete digital copy of the paper receipt.
Review Receipts Regularly
Without regular review, receipts pile up and create a backlog. This backlog increases the likelihood that important spending will fall through the cracks.
If you have a high volume of receipts coming in, you may choose to set aside a short time every day to process and file new receipts.
If you have a medium volume of receipts coming in, you may choose to set aside two days every week (e.g., Tuesday and Friday) to review submissions.
If you have a low volume of receipts coming in, you may even be able to push that review time out to a full week or more without getting behind.
Implement A Consistent Filing System
A consistent filing system can take on many different forms, but will often include:
- Categories for each expense (e.g., travel, office supplies, fuel, etc.)
- Standard naming convention (e.g., “YYYY-MM-DD_Vendor_Description” for digital files)
- Chronological organization within categories
Keep in mind that these are just suggestions. Your filing system may be completely different.
Add Notes To Receipts
In some cases, the receipt might not be enough for you to get a clear picture of the transaction. Collecting additional context can help you better review and categorize the expense.
If you use a paper-based system, make notes directly on the receipt about details such as the purpose of the expense, the employee who made the purchase, and those who were in attendance (e.g., at a business meal).
If you use a digital system, you’ll often have the ability to manually add notes in your portal.
This helps you avoid relying on your memory and makes reporting spending on your taxes much easier and more accurate.
Better Receipt Management With Coast
Better receipt management is possible with Coast!
Coast offers a smarter way to handle all your receipts, whether for fuel, T&E expenses, construction materials, office supplies, or field purchases, so you can eliminate traditional expense reports and all the back-and-forth.
- Real-time receipt capture: With real-time receipt capture, employees can take a photo of their receipt at the point of sale and add job codes or notes right from their phone.
- Automatic reminders: Does your finance team spend hours trying to track down missing receipts? Coast can get you those hours back by automatically following up with employees when a receipt or memo is missing from their submission.
- Digitized policy enforcement: Control company spending with limits you define for everything from dollar amount to day of the week to merchant category and many more. With these limits in place, you can be confident your team spends only what’s necessary for their job.
- Clean, categorized transaction data: Every transaction can be tagged with a job code and synced to your accounting system with a few clicks, making month-end reconciliation faster and more accurate.
- No more reimbursements or manual reports: By issuing Coast cards with spending rules that you define, you remove entirely the need for employees to pay out of pocket and submit expense reports.
Coast can help you eliminate the paper trail, stay on budget, and keep your books up to date — without slowing down your employees in the field.
For more information on how Coast can improve your business’s efficiency, visit CoastPay.com today.
Frequently Asked Questions (FAQs)
How long do I need to keep business receipts?
The length of time you should keep business receipts can vary depending on what the receipt is for and the jurisdiction where your business is located.
To be safe, keep records for at least three years — some experts recommend up to seven years — from the date you filed your tax return or two years from the date the tax was paid, whichever is later.
Consult with a tax professional or refer to your local tax authority’s guidelines for specific requirements.
What information should be included on a receipt for tax purposes?
A valid receipt typically includes the following information: vendor or business name, transaction date, description of the goods or services purchased, amount paid, and proof of payment (e.g., credit card details, “paid” stamp).
As a general rule, itemized receipts are better than regular receipts because they include more detail.
Can I use digital copies of receipts instead of paper?
Yes, digital receipts — or digital copies of the originals — are just as valid as paper receipts. As a general rule, the IRS accepts digital images or scanned copies, but digital copies must be clear, complete, and accurately reflect the original.
If you choose to create digital copies, make sure you scan the originals at a high resolution so you can read the information easily and without confusion.
