How to Organize Receipts for Small Business

April 28, 2017 Yoseph West

The key to successfully and consistently organizing your receipts is to lay a strong foundation from the start. Particularly, you want to follow an approach that simplifies tax deduction calculations and ensures you’re audit-proofing your business.

The type of foundation you create will depend heavily on whether you’re organizing receipts in the cloud or physically. To make this guide easier to digest, we’ll be talking about those approaches separately and show you how to organize receipts for a small business in each case.

Organizing Receipts in the Cloud

By organizing receipts in the cloud, your life will be significantly easier. When you go paperless, there’s zero risk of receipts getting lost, fading, or getting damaged. The only discipline required, to audit-proof your business, is snapping a photo or emailing in your receipts to a cloud document management solution. It’s a small behaviour change that has a huge impact!

And, there are a few good document management tools out there built to help (such as Hubdoc!). These solutions store, organize and extract the key data from your receipts.

If you combine those services with Xero or QuickBooks Online, both powerful cloud accounting platforms, your tax deductions will also be easy to calculate at the end of year. This is because your bank transactions will be automatically downloaded and will get organized into the correct categories, primed for tax time.

An alternate but effective option for many small businesses is to snap a photo of the receipt or scan it onto their computer and then upload directly to cloud storage services, such as Dropbox, Box or Google Drive. This is good but doesn’t automatically enter receipts into your accounting, make them easily searchable nor make tax deductions easy to calculate.

At Hubdoc, we like having all of our accounting and financial documents in one place and being ready for the tax man!

Physical Storage (a.k.a. using a filing cabinet!)

Storing receipts physically can be challenging, so it’s vital to be disciplined and create a strong filing structure from the start.

First, you want to identify the relevant tax deduction categories for your small business and location. Here are some resources to help, split out by region: Canadian businesses, U.S. businesses.

Second, leverage that list of relevant tax deductions as a starting point for your filing structure. For each tax deduction category, create a parent folder. Then create a list of expense types that would go into each deduction category and create sub-folders for them. Now you have a strong filing structure in place!

The third and last step is much simpler but is more challenging to do long term: saving each of your receipts and remembering to file them into their relevant categories.

This makes sure you have a copy of every receipt – a great milestone! Where it might fall short is protecting you against the risk of documents getting damaged and ensuring your business has one master accounting ledger with not only bank transactions but also the source documents, as required by the IRS and CRA.

Summary

In conclusion, the key to organizing receipts for your small business is making sure there’s a common sense workflow either with the software tools you’re using or your filing cabinet.

 

For a deep dive session on organizing receipts for small business, check out our webinar:

Watch now!

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