It has never ceased to amaze me how many small business owners are so laid back with regards to keeping hold of their business documents and records. This includes receipts and invoices for all business transactions, whether you compile your own businesses bookkeeping or you use the services of an accountant or bookkeeper not keeping all your records and keeping them in a legible manner leads to all sorts of problems.
It seems to be the recurring problem of people working so hard in their business that they don’t spend the effort to work on their business.
If you don’t have a receipt you cannot claim the expense against your business profits because you can never prove that the purchase was bought in connection with the trade of the business and, therefore, an allowable expense. This will inevitable increase your tax liability.
In addition if you use the services of a bookkeeper or accountant to prepare your businesses books and records they will inevitably charge you by the hour for work carried out and if they are searching for documents, telephoning you and looking for discrepancies this will only add to their fee, so keeping all your invoices and receipts is such a valuable time and cost saving for your business. I can’t understand why people would work hard doing the work in their business and waste money by being so laid back and negligent with such a simple but important part of your business. It also distracts you from working in your business if you are having to answer the telephone to provide information and documents that you should have provided in the first instance, if you are doing your own bookkeeping you will soon realise how much easier it is if you pay this small amount of extra attention to your documentation.
When you keep your receipts and invoices I always advise you mark each one stating how it was paid and indeed if the purchase was on account with the supplier and not paid for yet this should be recorded, do this at the time of getting the receipt or invoice because it’s fresh in your mind and so easy to do. Also, keep them in chronological order and in a readable condition. I have lost count the amount of blank pieces of paper (obviously till receipts) that I have been given because they were on a vehicle dashboard and they have faded so badly they are totally unreadable.