What Is the Best Way to Keep Receipts

Domenica Kon
What Is the Best Way to Keep Receipts
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Receipts, invoices, contracts: every business transaction generates some form of essential bookkeeping record. 

But whether you’re perpetually on the road as an entrepreneur—or simply caught up in running your business—keeping these records organized can be challenging.

The best way to keep receipts under control is with a dedicated, reliable system for storing and tracking your paperwork.

Why is keeping receipts organized so important?

Small business owners are required by law to maintain a record of their business transactions. 

Keeping business receipts and other financial documents organized makes it easier to:

  • File your end-of year tax returns
  • Navigate the audit process
  • Avoid CRA (Canada Revenue Agency) fines for failing to produce the proper source (supporting) documents

It’s a good idea to collect paperwork for every transaction, no matter how small or insignificant it may seem. 

You’ll find it easier to generate a proper paper trail if you avoid paying cash for things like office supplies and meal and entertainment expenses—and use a business-only credit card or bank account instead.

The best way to keep receipts for your business

The CRA requires that all business records and supporting documents be kept for a period of six years from the end of the last tax year they relate to. 

There are two options when it comes to receipts filing.

You can:

  • Store documents physically in paper file folders
  • Organize your receipts electronically using online accounting software or digital folders

Determining the best way to keep receipts will partially depend on whether you prefer to store paper or digital documents. 

Storing receipts physically

If you’re naturally organized, storing paper receipts and invoices might be your method of choice. When using physical files to keep stored receipts organized, however, it’s important to develop a routine and stay on top of it.

Here are 3 key steps for keeping track of your receipts physically:

1. Organize receipts by account

Not only does organizing business expenses by account (i.e. meals and entertainment, advertising expense, supplies expense) make them easier to record, it lets you refer back to individual transactions faster come tax time—without having to hunt through a shoebox of paper. 

2. Organize receipts chronologically

Since most businesses do their bookkeeping chronologically, it makes sense to also store your source documents this way. When you need to verify a particular receipt or transaction, you can easily find it based on the month it occurred. 

3. Write notes on receipts

Ideally, you should file receipts as they come in. If you’re constantly on the go, however—without daily access to your filing system—writing small notes on the backs of receipts will make them easier to file when you’re ready. Just be sure your notes are clear regarding expense purpose or category.

Storing receipts electronically 

Because physical storage can be vulnerable to theft, fire, flooding, and natural disasters, relying on paper receipts can be risky. Fortunately, you can save time and do away with the risk of physical loss by automating your receipt organization.

Here are 2 ways to store your source documents electronically:

1. Using a document management software

Tools like Dext Prepare, HubDoc, and Expensify let you and your team easily store receipts and invoices in the cloud. You simply use your phone to take pictures of your physical documents, then upload them to a mobile app that extracts all the data (including vendor, date, items, and amounts). 

Because these tools integrate with most cloud accounting software, you can:

  • Review the data before you upload it
  • Significantly reduce manual bookkeeping entries

Not only is receipt-tracking software a great way to stay organized on the go, images of your receipt will also remain stored in the cloud for convenient retrieval during an audit.

2. Use digital folders

If you’re not ready to spend money on software, an alternative option is to take photos or scan receipts and upload them to a digital folder like Google Drive or Dropbox. Just like physical storage systems, you can organize these folders by expense type and date. 

All in all, it’s best to minimize reliance on physical paperwork when storing receipts and invoices electronically. 

By asking vendors to provide digital copies of documents whenever possible, for example, you can avoid taking photos and uploading data altogether. Most cloud accounting software also lets you digitally import bank statements and credit card statements.

Make organizing receipts a habit

Once you’ve decided on the best way to keep receipts, it’s important to be consistent with your process. 

If you don’t have time to maintain a proper document storage system, consider having someone (like a bookkeeper, receptionist, or another administrative staff member) set up and manage one for you. 

While organizing your receipts can be time-consuming, ultimately it will:

  • Simplify your bookkeeping process
  • Make it easier to keep tabs on your spending (especially for tax purposes)
  • Help you avoid CRA fines

Want to reduce paper clutter and switch to a digital receipts storage system? Enkel can help.

Contact us and find out how we’ve married technology-powered accounting practices with experienced professionals to deliver reliable bookkeeping services for businesses across Canada. 

Looking for bookkeeping support?

Get in Touch