Small Business Bookkeeping Deadly Sin #5: Not Recording Cash PaymentsKelly
Cash is a convenient form of payment when you’re out and about. However, for a small business owner, it can create problems when using cash for business expenses. You receive a receipt, put it in your bag or pocket or car and then it becomes lost. It is incredibly important for small businesses to record EVERY expense in order to keep good financial records. So when you then go to make a record of that expense, you have a problem. Bad records can mean lost tax deductions worth thousands of dollars.
What is the best way to not commit this deadly sin?
Keep an ordered system for your tax invoices and receipts. This ensures that the correct numbers are being entered into your accounting program and you will have everything ready to claim your deductions at tax time.
What do I need to keep in order to claim a deduction?
For purchases of more than $82.50 (including GST), to claim a GST credit you must have a tax invoice. For purchases of $82.50 or less (including GST), to claim a GST credit you need either a tax invoice, receipt, cash register docket or invoice. If none of these options are possible, you need to write down the name and ABN of the seller, the date that the purchase occurred, a description of what you bought and how much you paid for it.
To learn what payments can be claimed as a tax deduction, the tax office website and various financial websites will have information available. Otherwise ask your accountant.
Here are 3 ideas to help you keep your receipts in check.
Keep an Envelope
It can be an envelope, folder or binder, but put all your cash receipts somewhere you’ll remember. It is a good idea to keep this near your computer so that you can put them in the envelope at the same time that you record them into your accounting software.
Take a Photo
A good habit to get into, regardless of how often you lose receipts, is to use your phone to take a photo of the receipt every time you make a payment with cash. Save them to the Cloud or upload them into your computer to make sure that they are permanently saved. Create a specific folder for the receipts you get each year to be able to find them quickly.
Use an App
There are constantly new smartphone apps being designed to help you with your finances. Find the one that works best for you and that allows you to scan your receipts and store them. Scanned receipts are accepted by the tax office as proof of deduction.
Click here to read the introduction to “The 9 Deadly Small Business Bookkeeping Sins… And How You Can Avoid Them”.
Stay tuned for Deadly Sin # 6