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Keeping receipts: Why it’s important for businesses

Maintaining organized, accurate financial records is key to the success of any organization — and that starts with keeping track of receipts. Whether you're a small business owner or an accountant at a large corporation, receipts are important for companies of all sizes.

Let’s dive into why keeping receipts is so critical and tips to help create a system for organizing and storing records.

What are business receipts?

Business receipts are written records that serve as proof of a financial transaction between a company and its customers or suppliers. They typically include the date, amount, business name, and purchase description.

There are several types of business receipts. Some of the most popular include:

  • Sales receipts: Issued to customers as proof of payment for goods or services purchased from a business.
  • Purchase receipts: Received by a business when it buys goods or services from suppliers or vendors.
  • Expense receipts: Issued when a business incurs expenses, such as office supplies, web design, business lunch, or travel.
  • Payment receipts: Issued when a business receives payment from a customer or client.
  • Refund receipts: Issued when a business refunds money to a customer for a returned product or canceled service.

Remember: If a service provider doesn’t provide a receipt, you can always ask for one.

Why are business receipts important?

Evaluating business performance, typically starts with reviewing receipts. Receipts are instrumental in maintaining accurate financial records, managing expenses, and ensuring compliance with tax laws.

Here are some reasons why business receipts are important:

  • Budgeting and accounting: A receipt provides a documented record of a financial transaction, which is essential for bookkeeping, accounting, and tax purposes.
  • Expense tracking: Receipts help businesses track their expenses, which is necessary for budgeting and managing cash flow.
  • Taxes and audits: Receipts serve as evidence of financial transactions and can be used to defend against any potential discrepancies or inaccuracies in a business's financial records during an audit.
  • Refunds and returns: Receipts are necessary for processing refunds and returns, and they help businesses keep track of inventory and sales.
  • Customer service: Receipts provide proof of purchase for customers and service providers, which can help resolve any disputes or issues with a purchase or payment.

Learn more about why it’s helpful to track expenses and business performance.

How long to keep business receipts

Per IRS guidelines, how long to keep business receipts depends on several factors, including the type of transaction, the industry, and the relevant tax laws and regulations.

Businesses should generally keep tax-related receipts for at least three to seven years. For example, the IRS recommends keeping tax-related receipts for at least three years after the date of the tax return, while some states require businesses to keep them for up to seven years. Get more information about how long you should keep records.

Which records you should keep

As a business owner, there are many types of records and receipts you should collect, organize, and store. The IRS recommends keeping the following records:

  • Gross receipts
  • Purchase receipts
  • Expense receipts, especially those related to travel, transportation, entertainment, and gift expenses
  • Records of assets
  • Employment tax records

It's important to keep these records organized and easily accessible for at least the minimum amount of time required by law.

Keeping up-to-date records will not only help you stay compliant with legal requirements but will also give you valuable insights into your operation’s financial performance, which can help you grow your business. Learn more about what kinds of records you should keep.

Best way to store and organize receipts

Storing receipts in a secure and organized way can help you avoid lost or misplaced records and make it easy to find and retrieve them when needed. Here are some tips to keep in mind when storing and organizing receipts and records.

Choose a storage method

Whether you use physical filing cabinets, electronic storage solutions, a receipt-scanning app, or accounting software, choose a consistent method of storage and organization that you can maintain over time.

Label records clearly

Make sure each receipt or record is clearly labeled with the date of the transaction, the vendor or customer name, the amount, and relevant notes about the transaction.

Categorize receipts

Organize receipts by category, such as sales, expenses, or taxes, to make it easier to find specific receipts in the future.

Keep digital copies

No matter what storage method you choose, consider scanning paper receipts and storing them in a digital folder on your computer or cloud-based storage.

You can also manage business receipts with PayPal. Create, send, and manage invoices, expenses, and purchase with PayPal for Business and the convenient PayPal app.

Frequently asked questions

How long should you keep business receipts?

Per IRS guidelines, how long to keep business receipts depends on several factors. In general, businesses should keep tax-related receipts for at least three to seven years.

How to organize receipts electronically?

It’s possible to organize receipts electronically in several ways, including with accounting software, electronic storage solutions, receipt-scanning apps, and digital folders, among other options.

What are gross receipts for business?

Gross receipts are the total amount of money a business brings in before any deductions or expenses, including sales of goods or services, rental income, interest, dividends, and other forms of income.

When giving a receipt, who keeps the original?

When giving a receipt, it's common practice for the customer to keep the original and for the business to keep a copy. However, this can vary depending on the industry and the specific transaction.

Discover more accounting tools and resources to help you improve your financial wellness.

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