Why are receipts of your expenses so important? Because they are the main paperwork (aka proof) of your business expenses.
There are cases where entrepreneurs provided their credit card bill as “proof” they deserve the tax deduction because it was a business expense and the IRS denied the deduction.
Now, if you saw my recent post on using credit cards, debit cards or even a check is better than using cash for your business purchase and are thinking I am contradicting myself, let me clarify. It is always better to have more than one form of paper trail for any kind of business expense. So using a business designated credit/debit card gives you a second line of defense to prove your business expenses.
However, since the IRS has refused such credit/debit card statements as proof, having your receipts to show for further proof of your business expense is just good business.
Another tip, don’t just keep your receipts, make them a record with detailed information on them! Let’s face it, the more detailed you are with business records the better.
A great example of good record keeping: I have a business lunch receipt for $80. On that receipt, it will show the place I ate, the amount I spent and the date/time. But I, as the business owner need more information. I need to write on the receipt that I met with my client John Smith from ABC Company to discuss his business and if I can take over that bookkeeping. As you may of noticed, I wrote information on the receipt that was not already on there and was detailed as to who I met, why I met them and what the nature of the business lunch was. (Remember, this is only an example). In other words, I didn't just write something like "business" or "business lunch" which is vague at best.
Writing these details is not only good business, it is what we refer to in the accounting world as best practices. As an entrepreneur, you always want to follow best practices while doing your bookkeeping as well as GAAP (General Accepted Accounting Principals in the USA).
If you have any questions on this subject or other bookkeeping subjects, you can contact me at Rebecca@rhbizsolutions.com. I look forward to talking to you about your bookkeeping needs.
Here's To Your Success!
RH Business Solutions