Is it important to keep expense invoices / receipts?

This is a question I get asked all the time. Do I really need to keep all my invoices if they are on my bank statements? Are receipts really that important in 2021 when bank statements have more details on them than ever? Tell me, are receipts important?

No, they are not.

They are crucial!

Sorry about that, but really, they are very important and not just because the government says so.

So why then? 

I’m sure you really can’t be bothered keeping boxes of invoices around, I get it, keeping physical paper invoices is a pain. The good news is there are better ways than the dirty (and probably lost) shoebox under your bed, more on those better ways later.

The Tax Office in Australia requires you to keep records for a minimum of 5 years. America is 3 years and the UK is up to 10 years (wow UK that’s rough). 

In Australia individual claiming tax deductions in excess of $300 per year will mean they must have receipts for all expenses claimed.

Keeping accurate records is an important part of business and life, but there are some more selfish and beneficial reasons other than ‘you have to’ as to why you may want to get better with receipts.

Keeping them will save you time & money

Surely not.

It is going to take me forever to organise and scan and input the data and errgggggg.

It wont, and I’ll show you how. But first, why?

It will save you time because you will not have to deal with explaining to your accountant or bookkeeper what your expenses are, and then digging them out of a box or heaven forbid trying to get a copy again from the retailer.

As accountants we so often wait for clients to get back to us because they are digging up receipts or invoices. This takes time, especially if they need to contact the car dealer or finance provider for another copy of the receipt or invoice.

Keeping them will save you money because time is money, but also because you will allow your accountant or bookkeeper to try and claim as much for you as possible. Having a good system for keeping them neat and tidy, or even better, online, is one of the most basic business practices to get good at as soon as you possibly can.

If a business is to face an audit and does not have receipts for expenses claimed, defending that audit will take a very long and costly amount of time. Not to mention the adjustment that will be made to your accounts and the likely fine / penalty could be massive. 

What if I don’t keep them?

Worst case scenario, in the event of an audit, you will be denied claiming expenses as deductions if you do not have receipts. It’s that simple.

Put simply, it can crush your business, overnight.

I have seen fees of $30,000 plus spent on accountants / bookkeepers defending audits and if you are denied claiming expenses because you don’t have receipts the adjustment can be hundred of thousands of dollars.

Keeping your receipts is the single best way to protect yourself from regulatory bodies and keep all your juicy tax deductions.

OK, but they are a pain

I get it, they are a pain. There are better ways to handle them than the box under your bed.

There are countless online based receipt capturing software packages out there now, most will even attempt to automatically read your invoice and enter it directly to your accounting software package for you.

Market leaders include ReceiptBank, Xero, HubDoc (now Xero owned), Expensify.. the list is long.

Uploading your receipts can be easily done in various ways, including via a quick phone photo, email forward directly to your software or manually uploaded. 

You leave the shops, take a photo of the receipt and go home. It will be waiting for you in your software later.

Summarise this for me please

Keeping receipts can be painful if you don’t cheat and get some software. So get some software, make it easy for yourself and protect yourself from Audit and unwanted time and money wasting activities.

Besides being neat, tidy and organised are underrated skills that we could all get some practice at.

So get practising!