If you are running a business, chances are that from time to time you will have to buy business items with non-business funds i.e. your own cash, personal credit cards, personal savings/cheque accounts etc. It is important to include these sorts of purchases in the business accounts because not only do they help to tell your business “story”, but they also assist in reducing tax debt. However, as the items haven’t been purchased via the business bank account, it is easy for business owners to forget about them! What is required is a system that will help you get your cash receipts organised so that they are never forgotten again. Below is such a system which you will hopefully find useful if you do your own bookkeeping and/or if you utilize a bookkeeper/accountant.
Okay so we’ve established it’s importance to include those cash receipts in your business accounts but what do you do with them all? Here are my 7 steps to getting organised with cash receipts:
1. Empty your wallet or bag of all receipts every week and keep them in an easily remembered and accessible place on or near your office desk.
2. Pick a time during the week that you can put aside in order to sort through the receipts. This might be when you do your other bookkeeping tasks.
3. The first thing to do is sort the receipts into these groups: “Credit Card”, “Cheque/Savings Account” and “Cash”.
4. Next, scour each receipt for items you believe are business-related and mark them with a highlighter pen. Make notes next items which require special attention especially if you think the bookkeeper/accountant needs to be made aware of special circumstances regarding particular transactions. Mark items that you think might be business-related but aren’t sure if they are – your bookkeeper/accountant will be able to assist you with these items and you never know, an item that you thought would not be tax deductible, may well be!
5. Next, order the receipts by date – this makes it easier when it comes time to enter them into your accounts and if you have a bookkeeper, will save him/her loads of time.
6. If you are preparing the receipts for your bookkeeper/accountant, gather the receipts together and place in an envelope and mark the envelope “Cash Purchases for the Month of _____”. This will alert the bookkeeper/accountant to the fact that these receipts are not related to any business bank statement you may provide.
7. Lastly, enter the receipt data into the accounts (if you do your own bookkeeping) or this will be done by your bookkeeper. (Note, there are several programs available currently that will automatically “push” your receipts into your accounting program (not all accounting programs support this). The 3 programs I recommend for this job are Receipt Bank, Shoeboxed and Invitbox – check them out if you think this is something that might assist you).
So don’t forget your cash receipts people! Not only do they help to paint the picture of your business “story” but they often include items which are tax deductible, there-by helping to reduce your overall tax debt. Also, if you are registered for GST, they assist in reducing your BAS liability, and as we know, every little bit helps! It’s so easy to forget those receipts swimming around in the bottom of your bag or squished into the corner of your wallet! Try utilizing my tips above and see if you can’t just get a little bit more organised! Remember, good record keeping will make the job easier and if you have a bookkeeper, will save him/her time which in turn will save you dollars on bookkeeping fees!