Financial Record Keeping: Best Practices for Small Businesses

Financial record keeping is essential for smooth tax preparation. Keeping the process of recording all financial transactions thorough, accurate, and precisely helps a business succeed and helps its finances meet all regulations and the required standards of operation.

This article will suggest six financial record keeping best practices for small business owners to simplify their bookkeeping. 

Incorporate a good document management system into your business

As you grow your business, your business documents and files expand, too. Instead of stacking your desk and drawers with piles of paper, try to go paperless so you can access your records easily, at any time, from anywhere. 

You can then implement a digital document management system to organize all your business documents. Then set a document control system that specifies how often to review and update documents.

Back up and secure your records

We live in a time where data breaches and natural disasters are rampant. Take time to back up and secure your records to avoid catastrophe. Whether you store your records on paper or a hard drive, remember to back them up in at least two places. 

Digitizing all your important documents is also a good idea as it protects them from being lost, stolen, or destroyed. However, storing records digitally increases the risk of theft. So when you store your business records online, secure your account with a unique and strong password, and enable two-factor authentication.

Understand the lifecycle of records 

Every record will have its own lifespan, and some financial documents must be kept for a certain amount of time. It’s necessary to ensure that all retention and disposal schedules are correctly applied to each type of record generated in each department. 

Here are the essential documents you need to keep and the time you need to keep them.

Seven years or longer

When it comes to taxes, it’s a good idea to preserve any tax records for at least seven years. The IRS’s audit statute of limitations is three years. In some situations, they can go back as far as six or seven years (e.g., if you underreported your income by 25% or more.) State statutes of limitations vary, so you can consult a tax professional to understand your state’s limitations.

You should also keep for up to seven years any records that corroborate the information on your taxes, such as your W-2 and 1099 forms, receipts, and payments. Keep receipts for any assets you own for as long as you own them, such as receipts for home renovation work. 

One year

Records that you need to keep for at least one year are the following: 

  • Non-tax-related bank and credit card statements
  • Investment statements
  • Paycheck
  • Medical bills 
  • Receipts for large purchases

If you need to support your current-year tax preparation or have an unresolved insurance dispute, don’t throw away these records for at least a year!

Many banks and credit card companies now provide electronic statements, so it’s not necessary to keep paper versions on hand. However, if you still want to keep a copy of those records, you can digitize them by scanning them with a receipt scanner before discarding the original paper documents.

Less than a year

Some documents do not need to be kept in your home for an extended period of time. Don’t bother about keeping receipts unless they’re related to:

  • Product warranties
  • Your tax returns
  • Insurance claims

You can throw away most monthly bills after paying them or after they have been deposited into your bank statement. If you need to go back to verify anything later, see if you can access past invoices through online account access. Many service providers store past bills and invoices available online for the past few months or longer.

Start a new file after each year

Starting a new file at the start of each new year is a simple method that can help you save a lot of time and make going through your information much easier. 

It will also make it easier for you to remove records you no longer need for whatever reason, such as when the five-year retention period has expired.

Keep records of transactions for bank reconciliations

Bank reconciliations help small businesses detect errors and better understand their financial situation. It’s also a good opportunity to double-check that you have records for all of your business dealings.

Some accounting software allows users to attach documents to each transaction, so anyone who opens your books can view the associated record. It’s good to match every transaction in your accounting software to a record during your monthly bank reconciliation. Make sure you have a corresponding invoice, receipt, or contract as you go through your company activities.

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Choose accounting software that can generate records

Today, many accounting software can generate reports from customers’ invoices. For example, Shoeboxed, the painless receipt scanning and expense management app tailored for freelancers and small business owners, can take over the heavy task of preparing reports from your plate. 

After scanning your receipts with OCR engines, Shoeboxed will automatically create clear and comprehensive reports so you can send them out for approval immediately. Shoeboxed can help small business owners save time and effort, allowing them to spend more time on the business’s core. 

The bottom line

Keeping financial records properly can be challenging at first. Still, as long as you keep these financial record keeping best practices in hand, you’ll be able to run your business smoothly even if you don’t have an accounting background. The most difficult part is collecting the information. After you’ve formed the collecting habit, the rest will be in place. 

Don’t forget to subscribe to the Shoeboxed blog for more helpful accounting and bookkeeping knowledge and best practices for small business owners! 

About Shoeboxed

Shoeboxed is a receipt management application that turns your receipts and business documents into a digital format in just one click by taking a picture straight from your smartphone or scanning a pdf. It automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. Shoeboxed ensures you will always have your receipts securely stored and ready for tax purposes.

Access your Shoeboxed account from your web browser or smartphone app. Stay audit-ready with Shoeboxed for FREE now!

Business Receipts Basics: What You Need to Keep for Tax Seasons?

As a small business owner, you know that you need to keep track of your business’s financial documents for tax purposes. Those documents include business receipts, bank statements, purchase history, credit card statements, online banking records, and a lot more. 

However, staying on top of those documents isn’t as easy as a walk in the park. Which business receipts should you keep? And for how long? And in what form? This article will answer all these burning questions.  

Which receipts do small business owners need to keep?


According to the IRS, keeping good records will help you monitor the progress of your business, prepare your financial statements, and identify sources of income. From that, you can keep track of deductible expenses and prepare your tax returns easier.

On the other hand, the IRS doesn’t explicitly mention the possibility of being in trouble if you don’t keep the right documents. When it comes to keeping receipts for tax preparation, it’s a good idea to be “better safe than sorry” and keep all documents related to your business. It’s even better to consult with a professional accountant about this. However, as a starting point, here are a few types of business receipts that you should absolutely keep:

Inventory

Did you buy inventories to sell to your customers? Or did you sell things made from raw materials? If so, you should definitely hang on to documents that identify the payee, the amount, and proof of payment for the items. Try to get a receipt for all these purchases. However, if you can’t get a receipt, keep the invoice and canceled check (proof that the check has been paid.)

Business assets

The term “business assets” refers to the property you own and use in your business. Furniture, computers, vehicles, or machinery are typical examples of assets. If you’ve ever tried to file assets for taxes on your own, you know that you’ll have to deal with a complicated thing like “depreciation.”

To make tracking depreciation easier, you should keep track of when, where, and how much money you’ve spent on your business assets. For example, you can keep receipts of when you purchase your company’s computers. You’ll also want to keep records of when you sell one of your assets.

Other business-related expenses

Most of your business receipts will likely fall into this category. Though every business is different, here are the most common examples of business-related expenses:

  • Advertising: Advertising expenses include designing and purchasing business cards, online and offline advertising, billboards, web hosting, etc. 
  • Vehicle expenses: Vehicle expenses such as gas and maintenance fees are tax-deductible, so don’t throw away those receipts!
  • Education expenses: This expense applies when you hire a professional or an education service to train yourself or your employee. Don’t forget to keep your invoice or receipt and your bank records to prove that you paid for the education expenses. 
  • Professional services: This expense applies when you hire a lawyer, accountant, bookkeeper, or graphic designer to work for a certain period of time. You will need to keep the invoice and the receipt when you pay the bill. 
  • Entertainment: Entertainment expenses such as taking clients out for lunch can be tax-deductible, but you need to pay close attention. You have to keep both the receipt and records showing that your activities were directly business-related (e.g., an email invitation for a business lunch.)
  • Networking: If you attend a networking event or conference, you’ll need to keep your receipts, bills, and bank records as proof of purchase.
  • Office supplies: Extra office expenses, such as printers, staples, paperclips, scanners, etc., are tax-deductible. So don’t forget to take the receipts every time you visit office supply stores! 
  • Travel expenses: During your work, you may need to visit a client or attend a conference in another state. Though the IRS requires specific qualifications for deductible travel expenses, you can keep certain receipts or bills of your travel expenses to deduct all or part of a trip. You can check out our article on how to manage your business travel expenses effectively.

How long should you keep business receipts?

In general, you should keep business receipts for three years (from the date you file your tax return). In some special circumstances where fraud or severe tax underpayment is suspected, the IRS might require you to keep your receipts for up to six years. For example, if you underpaid your taxes by more than 25 percent, you will need to keep those records on hand. 

How Shoeboxed can help you digitally store your business receipts

Years’ worth of business receipts can result in piles of papers. Fortunately, no one says that you have to keep all your business receipts in their original paper form. So, what’s the best alternative to save all your documents for any potential IRS audit? 

The answer is to digitize them. As the IRS accepts digital receipts, you don’t need to store physical copies of your bank statements, purchase history, or credit card statements. Today, there are many receipt scanning apps that help you digitize paper receipts and save them for years.

Shoeboxed is an all-in-one receipt management app for small business owners and freelance accountants. With an OCR (Optical Character Recognition) engine and human-verified feature, Shoeboxed ensures that your business receipts are precisely scanned, clearly located, and easy to track. You can then create clear and comprehensive expense reports that include images of your receipts, export, share or print all the information you need for easy tax preparation or reimbursement… within a few clicks. 

Moreover, Shoeboxed‘s mileage tracking and business card storing features make it a one-touch app to store and access all your business’s important information. 
Sign up and go paperless with Shoeboxed today!

5 Best Receipt Scanner and Organizer Apps for Small Businesses in 2021

If you’re a freelancer, an independent contractor, or a small business owner, you’ll know that organizing receipts can cause endless headaches. 

Turning your receipts from paper to a digital format with a receipt scanner makes your expense tracking much simpler. This is the best way to eliminate piles of paper and organize your spending habits. Using a receipt scanner helps you work faster, improving efficiency and giving you a competitive advantage.

A receipt scanner used to be a hardware device to scan a specific type of document, but now, in today’s world of smartphones and apps, actual scanners are a thing of the past. Your smartphone’s camera and a receipt tracking app are all you need to get your receipts scanned and organized. This article lists the best five receipts scanner and organizer apps and their specific features for particular purposes to help you choose the right one. 

How does a receipt scanner app work?

A receipt scanner and organizer app is a mobile app that scans specific forms of documents. This tool is essential for people or businesses to keep digital copies of their receipts for management or tax purposes. It is also helpful for professionals who need to track and prepare expense reports. 

Most receipt scanning apps work the same way. All you need to do is download the app, take pictures of your receipts, and fill in some additional information. The app creates a digital version of your receipts, which you can retrieve from a digital filing system anytime. 

These digital receipts can be kept for years without the danger of losing or damaging. You can always search for the receipt you need by entering the keyword, date, or time. Beyond such search features, there are numerous benefits to using scanner apps.


Advantages of scanner and organizer apps
A receipt scanner and organizer app offers the following advantages:

  • Security: Keeping digital copies of your receipts is safer than keeping the physical version. First, it lowers the risk of loss or damage by flooding or fire outbreak. Second, since documents are stored in a secured program and protected by a password, they are less accessible to hackers. And lastly, you can always create backup copies of your scanned receipts. 
  • Efficiency: A receipt scanner and organizer helps you track, manage, and organize your financial documents faster and makes them easy to find. It allows you to work quicker and more efficiently. 
  • Sustainability: Going paperless helps you eliminate unnecessary waste, such as paper, printer, ink, and so on. 
  • Flexibility: Some receipt scanner and organizer apps can handle various sizes of documents and send them to USB memory storage, email, fax, or file location. 

Discover: Why Small Businesses Need To Transform Paper Receipts To Digital Data

The top 5 receipt scanner and organizer apps for small businesses in 2021

1. Expensify

Price: From $4.99/month

Platform: iOS and Android

Expensify works best for small businesses with a limited budget as it comes with various pricing plans to meet your needs. Individuals can use the free version to scan up to 25 receipt scans per month without paying the monthly subscription fee. And if you wish to upgrade the plan, Expensify’s pricing ranges from just $4.99 to $9 per month. 

If you’re looking for a receipt scanning software that can also organize your receipts, then Expensify is a great choice. After you capture your receipt, Expensify will automatically upload it into the system. However, you’ll need to manually input some data so that the software can store your receipts correctly. 

A standout feature of Expensify is its SmartScan OCR, (Optical Character Recognition technology). The feature saves you time entering receipts by scanning them, verifying that the expense is compliant with your employer’s rules before organizing it into an expense report – all automatically.

Expensify integrates with dozens of accounting software such as Quickbooks, Xero, and NetSuite. By this, you can easily track and view expense reports from the software of your choice. All you have to do is upload and label receipts, and Expensify will take care of the rest!

2. Shoeboxed

Price: From $18/month

Platform: iOS and Android

With the pricing plans starting from $18 per month, the Shoeboxed receipt organizer is exclusively designed for freelancers and small businesses who are willing to spend a little more to be “audit-ready.” This app doubles as a receipt scanner and organizer, making it one of the most versatile choices on this list. Shoeboxed allows you to scan and upload your receipts via email or the mobile app. Otherwise, you can mail your receipts to a Shoeboxed facility to have them scanned and organized. 

Just like Expensify, Shoeboxed integrates with numerous accounting software, from Quickbooks, Xero, Wave Accounting, FreshBooks, and so much more. Shoeboxed’s OCR engine and human data verification features ensure that the digital versions of your receipts are legibly scanned, clearly categorized, and easy to locate. These receipts are in precise format, which is accepted by both the Internal Revenue Service and the Canada Revenue Service in the event of an audit. What’s more, Shoeboxed offers the mileage tracking and business card storing feature, making it a one-touch app to access all your important information. 

See more: How To Scan A Receipts Digitally With The Shoeboxed App: A Step-By-Step Guide.

3. Zoho Expense

Price: From $5/month

Platform: iOS and Android

Zoho Expense is a digital receipt organizer specializing in serving freelancers who like to keep things mobile and user-friendly. This app allows users to scan receipts and organize each one in their own order. You can also mail your digital receipts to the Zoho Expense software and sync the data with various business programs. 

Just like the above, Zoho Expense comes with an OCR engine and integrates with various accounting software such as QuickBooks, Xero, and Sage Accounting. But one of the best features that Zoho offers is its storage capacity. While most receipt software products put a limit on the number of documents you can upload per month, Zoho Expense offers users a set amount of storage space (from 5 GB and above). Since most receipt images take up relatively little storage, you can store a lot of receipts with Zoho Expense. 

The Base plan is free, the Premium plan is $5 per month, and the Enterprise plan is just $8 per month. Overall, Zoho Expense is the best choice if you want to organize your receipts on a budget and don’t mind doing some of the work manually.

4. Smart Receipts

Price: From $9.99/year

Platform: iOS and Android

Smart Receipt is a receipt-focused app that works best for those who want to keep the process of tracking expenses and generating expense reports exceptionally simple. This app has an OCR engine that performs text recognition on your scans, helping you search and organize the receipts. It can even create a spreadsheet with more than 20 different types of data recognized with corresponding fields. 

This app is also simple to use. Start by creating a report with all the fields you want to include. Then take a snapshot of your receipt and fill in the field. Then you can generate your report in PDF, CSV, or zip file. You can always generate more than one report from a receipt. 

The free version of Smart Receipts already has necessary features for small businesses (such as customizing PDF, CSV, or ZIP format for your reports, mileage tracking, and OCR functionality). However, you can always purchase a yearly subscription for $9.99 per year to enjoy additional benefits such as ad-free, automatic backups to Google Drive, automatic currency conversion, the ability to edit or customize the PDF report footer, and so on. 

5. Fitfin 

Price: Free

Platform: iOS and Android

What most people imagine when they think of receipt scanning apps is tracking business and travel expenses. But the truth is, one of the most common purposes for receipt tracking is budget planning. Fitfin is perfectly designed for this purpose. 

This receipt scanner and organizer app is a great way to track expenses and stick to a budget. It allows you to set your budget for various categories and save your receipts to corresponding folders. You can break your receipts down into items so that you can see where every dollar goes in your budget. The great thing about using Fitfin is that you can predict your spending, which you can track against your budget for real-time, proactive budgeting.

In short, Fitfin is best for small businesses that need to manage their budget precisely by giving you an overview of your finances and predicting how much you will spend. 

The bottom line

Choosing the best receipt scanner and organizer app depends on the needs of your company. For example, if you don’t go on business trips frequently, you don’t necessarily need one with a mileage feature. If you’re preparing for an IRS audit, you may want a feature-filled app – like Shoeboxed – that ensures your receipts are audit-ready. Compare the features and pricing of each app and try several before making a decision.