Records Management: How to Avoid the Shoebox of Receipts
Recently, I have had quite a few start-up clients approach me and tell me they want to get organized from the start and “for once and for all”. The motivation behind wanting to be organized must spring (pun intended) from the natural tendency to want to start the spring season off on the right foot and be rid of the dreary winter. Another reason for this motivation could be that tax time is here and for many of my self-employed clients, getting all their business documents and receipts together for tax filings can be daunting. Can you remember what that receipt was for from almost a year ago?
The following are a few tips to help self-employed individuals or business owners get started on organizing themselves for the new business and/or tax year:
Save all business expense receipts
In the beginning, just building the habit of collecting business expenses is a huge start. Collect paper invoices, receipts and place them in a file folder. To digitize, a quick efficiency hack could be to take a picture of the invoice or receipt and save it to a cloud storage site like Dropbox directly from a phone or mobile device. There are many apps that can take a picture and convert the invoice or receipt into a pdf also.
The side benefit of using your phone to take pictures of receipts is that most phones name the photo using the date so tracking by date becomes slightly easier.
Of course, a paper scanner can be used also, but there is added time of saving the file to a location specifically and scanning small receipts can be time-consuming.
For more seasoned self-employed or business owners who are tech-savvy can consider using expense tracking apps to take pictures and record your expense receipts right on the spot. Don’t forget that many online accounting software programs – such as Quickbooks Online – have mobile apps that can be integrated directly into the software program too.
For the more seasoned self-employed or business owners who don’t use mobile expense tracking apps or do not have access to an accounting software program, using a simple Excel Spreadsheet to track information can be just as powerful as any app. See attached for a template that is downloadable.
Group the business expenses by category
Regardless of whether an accounting software is being used or a simple Excel spreadsheet is being used, I am a big fan of creating formats and templates that can be used for multiple purposes. So, for self-employed individuals and business owners, I suggest following the CRA business expense categories that are available on the T2125 – Statement of Business or Professional Activities. There are about 20 categories on the form and by organizing receipts and expenses into these categories consistently will help make bookkeeping more accurate and tax filings more efficient.
Review expenses periodically
As the adage goes, “what gets measured gets done.” By reviewing actual business or self-employed expenses on a regular basis, you make sure nothing is missed or forgotten. If you are not confident with numbers or Excel, the review of expenses can be delegated to a bookkeeper or accountant to properly tally up and record.
Many people get scared when it comes to bookkeeping, accounting, and tax. but it does not need to be overwhelming. It starts with getting organized first!
Download Excel Worksheet for Records Management
Feel free to share your favourite tips for start-up organizing tips below, and connect with me to discuss how we can make your business more efficient.