Maintaining organized, accurate financial records is key to the success of any organization — and that starts with keeping track of receipts. Whether you're a small business owner or an accountant at a large corporation, receipts are important for companies of all sizes.
Let’s dive into why keeping receipts is so critical and then look at tips to help create a system for organizing, categorizing and storing records. Get even more accounting basics here.
Business receipts and/or email receipts are two names for the same thing. These are written records that serve as proof of a financial transaction between a company and its customers or suppliers. They typically include the date, amount, business name, and purchase description.
While different kinds of company receipts may have different names, they’re all equally important. You’ll want to keep track of them to be able to prove income and expenses when tax time comes. There are several types of business receipts. Some of the most popular include:
The importance of business receipts cannot be overstated. Evaluating business performance typically starts with reviewing receipts. Company receipts are instrumental in maintaining accurate financial records, managing expenses, building a profit and loss statement, and ensuring compliance with tax laws.
Here are some reasons why business receipts are important:
Learn more about why it’s helpful to track expenses and business performance.
Per IRS guidelines, how long to keep business receipts depends on several factors, including the type of transaction, the industry, and the relevant tax laws and regulations.
Businesses should generally keep tax-related receipts for three to seven years. For example, the IRS recommends keeping tax-related receipts for at least three years after the date of the tax return, while some states require businesses to keep them for up to seven years.
This is all based on what the IRS considers the period of limitations, or period of time that you can still amend your tax return to claim a credit or refund, or that the IRS may come back to reconsider your return. You’ll want to hold onto your receipts for the period of limitation. In most cases, that’s three years, but if you try to file a claim for a loss or a bad debt deduction, you’re going to want to keep business receipts for at least seven years.
Keep in mind that even though the IRS has these rules set up now, laws and regulations could change over time.
If you open a PayPal business account, it’s a great way to keep all your business transactions in one easily accessible place. Keep the paper records too, but a digital source lets you access that data forever.
There are many types of records and receipts you should collect, organize, and store. The IRS recommends keeping the following records:
It's important to keep these records organized and easily accessible for at least the minimum amount of time required by law. It’s probably best to keep all documents together and organized by tax year.
Keeping up-to-date records will not only help you stay compliant with legal requirements but will also give you valuable insights into your operation’s financial performance, which can help you know your business, and grow your business. Learn more about what kinds of records you should keep.
Storing receipts in a secure and organized way can help you avoid lost or misplaced records and make it easy to find and retrieve them when needed. Here are some tips to keep in mind when storing and organizing receipts and records.
Organize receipts by category. At the bare minimum, organize them into sales, expenses, and taxes, to make it easier to find specific receipts in the future. You will want to categorize receipts for taxes to protect your small business. But if you can be even more granular, try to split payment receipts from refund receipts, and purchase receipts from expense receipts.
Whether you use physical filing cabinets, electronic storage solutions, a receipt-scanning app, or accounting software, choose a consistent method of receipt storage and organization that you can maintain over time.
Make sure each receipt or record is clearly labeled with the date of the transaction, the vendor or customer name, the amount, and relevant notes about the transaction.
No matter what storage method you choose, consider scanning paper receipts and storing them in a digital folder on your computer or cloud-based storage.
Discover more accounting tools and resources to help you improve your financial wellness.
In partnership with three expert business owners, the PayPal Bootcamp includes practical checklists and a short video loaded with tips to help take your business to the next level.
We use cookies to improve your experience on our site. May we use marketing cookies to show you personalized ads? Manage all cookies