It’s important to keep track of your expenses so you know exactly how much your company is spending (and on what). By organizing your invoices, bills, and receipts by type, department, and age, you’ll be able to make better purchasing decisions and be better prepared for tax season.
Keep Every Invoice and Bill
Don’t throw away your invoices, bills, or credit card statements. When you get one, note the amount and date due on your calendar, then file it away. If there’s ever a question about what the invoice or bill was for, you’ll be able to easily find it and review it.
Organize by Due Date
When you first get invoices or bills, file them in chronological order by due date. This will ensure that you’re paying your bills on time because you can just check the due date on the next bill, instead of having to go through every single one.
You should also keep a copy of every receipt. The IRS only requires you to keep receipts if the expense was $75 or more, but it’s better to be safe than sorry. Keeping your receipts will help you make your case if the IRS ever audits your company.
Make Notes on Your Receipts
Before you file your receipts away, make a note on them that states the business purpose. You’ll probably remember why you bought ink or a printer, but it’s harder to remember why you’re considering dinner a business expense. In the case of dinner, write down who was at dinner with you and what business was discussed during dinner.
Scan Your Receipts
After you’ve made a note on your receipt, scan it and save it on your computer. The IRS expects you to keep expense documentation for 6 years, and the ink on your receipts will probably fade a lot in that time frame. Thankfully, the IRS accepts electronic copies. It’s a good idea to still keep a paper copy of each as a backup.