At some point during the next few weeks, a shoe box will arrive in my mail. This shoe box will contain every receipt for every purchase made during 2012, from the Playstation bought for a kid’s birthday, to the laptops bought for new employees. Every coffee receipt, every food purchase, every bill of sale. It will tell the entire financial story for a business owner who hasn’t yet found an organizational system for his or her tax receipts.
On top of purchase receipts, a good shoe box will also contain all necessary income statements including copies of invoices or accounts receivable records, bank statements, credit card statements, lease payment records, etc.
A great shoe box will have all this paperwork sorted by month and expense.
As any bookkeeper will attest, a shoe box is rarely good and almost never reaches “great” status. Which results in a lot of time wasted to sorting and paper-chasing, extra costs to your business in bookkeeping fees, as well as the potential to miss out on some great deduction opportunities because of missing paperwork that your bookkeeper isn’t aware exists.
Even if your filing and organization skills are lacking, there are a few very simple habits that you can incorporate into your receipt tossing “filing” ritual that can save you a lot of time and money come tax season.
- Get into the habit of making note of whom you are dining or entertaining with and why on the backs of your receipts – EVERY time. If you get audited 4 years from now, you’re never going to remember that the $700 receipt from The Keg was for the night you took your employees out to celebrate bringing on a new team member. If your business involves travel, you should also be noting this information on your travel receipts.
- Find a central location for your shoe box. Odds are if you’re tossing receipts willy nilly into a shoe box, filing isn’t your focal point. So why make it harder on yourself by hiding it where you have to go looking for it? It should be where it makes the most sense for convenience. (i.e. on or around your desk and within reach) If you make your shoe box visible throughout your day, you’ll be more inclined to put what needs to go into it into it.
- Use open-ended box folders, accordion folders, large envelopes with the tab removed or even large freezer bags in your shoe box labelled by month. Once you are done posting your expenses or income in whatever bookkeeping method you use, you just put them in the right folder.
- If you require multiple shoe boxes, when one is full, close it up, label it and start a new one to prevent end of the year receipts getting mixed up with beginning of the year receipts.
If you make sure that you are putting all the necessary documentation into your shoe box folders, your month & year-end closing will go much smoother, and won’t go unnoticed by your bookkeeper – who will probably thank you profusely and send you a smaller bill.
© Trina Waller 2016. All rights reserved. Unauthorized use and/or duplication of this article, and the material contained within, without express written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given the post author, TW Intuitive Office Solutions, and TWIOS.com, with appropriate and specific direction to the original content.