As a dedicated small business owner, you are constantly juggling responsibilities. A Forbes article recently noted that 8 out of 10 small businesses have zero employees, leaving business owners to their own defenses. Knowing where to place your attention and how to use your time can be tough. Amidst the chaos, receipt tracking may seem trivial but don’t underestimate its role in maintaining your business’s financial well-being.
In this article, we will provide 10 simple yet effective tips for small business owners to organize and track receipts designed to minimize expense management stress. We have compiled techniques from manual receipt scanning to deploying receipt scanning software, or better yet, receipt tracking software with fully automated accounting solutions for expense management. The objective is to ease some of the operational burdens you face and bring a smile to your accountant’s face when reconciling your bank accounts or looking for deductions at tax time. So, let’s get started!
1. Mastering categorization
The starting point for effectively managing receipts is accurately categorizing your expenses. Throw away the receipt box for credit card receipts and divide your receipts into categories, i.e. office supplies, travel-related costs, utilities, employee wages, etc… Create individual folders for each category. This helps with tracking your spending, reconciling transactions, and filing taxes.
Alternatively, you can scan your receipt and create electronic folders to digitally store them. This can be done manually, or ideally, you can use a fully automated accounting platform powered by AI. The system will use a function called receipt capture and automate the rest: scan, upload, extract receipt data, verify, match, and reconcile every transaction. Talk about a time saver!
2. Chronology is key
The next thing to consider is how to file your receipts within the categories. If you physically store receipts in files, one good approach is filing them in chronological order. Although this might seem unnecessary, it’s incredibly effective, especially when you need to quickly find a receipt during an audit or at tax time. Additionally, it sets you up for success when you need to track and assess your spending habits, which is key to responsible spending.
On that note, if you aren’t already reviewing and tracking your expenses, we recommend you start. It’s a good way to improve your financial management and ensure your business is on the right track.
Keep in mind that if you use receipt management software for small business, chronologically organizing your receipts is another manual step you can skip. Accounting software like Docyt makes it easy to collect and track receipts by digitizing them and keeping an automatic record of them.
3. Go Digital
In our tech-driven world, digitizing receipts is a game changer. You can simply snap a picture of a receipt with your phone and upload it into your accounting software. This will transform expense management, reduce tax-time headaches, and enhance security.
4. Leverage AI-powered accounting software
Better yet, employ accounting software with receipt scanning capabilities and AI-based automation to manage the expense process end to end. With AI-driven digital receipt software featuring digital receipt capture, automated expense categorization, and powerful business intelligence, you are arming yourself with accurate, real-time data to enhance your business decisions.
5. Details matter
Always remember to take notes! Each receipt should clearly state the date, vendor, amount, and purpose of the expense. Accurate and detailed records are vital for tax purposes.
6. Update regularly
To prevent having an overwhelming mountain of expenses to reconcile at month-end, regularly update your records. This is another area where AI-powered accounting solutions like Docyt AI have transformed the game of closing your books in a timely manner. From the moment you submit your expenses into the system, Docyt AI automatically reviews, scans, categorizes and reconciles every transaction before syncing it into your general ledger. Docyt AI does this in real-time, avoiding any delays when comes time to month-end closing.
7. Tax-time prep
Always keep receipts for the time specified by your local tax regulators. Why? Proof of spend is non-negotiable if the expense is used as a tax deduction, the time required for different types of expenses varies, and having records will safeguard you against fines and penalties in the event of an audit.
Again, keeping digital records, whether you choose to manually record the receipt and use electronic filing systems or adopt an AI-powered accounting platform like Docyt, will minimize stress and bring tax-time relief.
8. Reconcile and review
Reconciling and reviewing your expenses improves accuracy and gives you a better picture of the financial health of your business. This ensures you accurately record expenses and helps you spot things like duplicates and fraudulent transactions.
On that note, an AI-driven automated accounting platform can fully automate expense management from start to finish. The beauty of accounting automation is that your expenses can be reconciled in real-time, which gives you faster visibility into overspending or fraud.
9. Separate personal and business expenses
Whether you use a manual or digital receipt tracking system, this fact will not change…Only make purchases from your business account for business expenses. Your accountant will thank you!
10. Consult your accountant
Finally, keep open lines of communication with your accountant. By frequently discussing your approach to expenses or organizational methods, you are more likely to adhere to general accounting practices and avoid future challenges.
There you have it – 10 useful tips to help you regulate your business expenses and manage receipts.
Docyt is here to help minimize the burdens of wearing the many hats of a small business owner. More than just another receipt organizing software, a receipt tracker, or an app for receipts with an automatic receipt scanner, Docyt is an AI-powered automated accounting hero that will fully automate your expense management process and let you focus on the things that matter.
Whatever you decide, just take a deep breath, and let’s conquer this challenge together – we’ll tackle it one receipt at a time. Like what you read and want to learn more about leveraging Docyt AI for your expense management? Contact us today!