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!

What Are Our Daily Receipt Papers Made Of? 3 Common Types of Receipt Paper

Have you ever wondered what your receipts are made of? Did you know that some types of receipt paper might be harmful to your health and the environment?

In this post, we’ll go through the most common kinds of paper used for receipts and discuss the top health and environmental issues regarding these materials.

Let’s go!

3 common types of receipt paper 

What kind of paper is used to make receipts? 

There are three popular types of receipt paper currently on the market: thermal paper, wood-free paper, and carbonless paper. Let’s have a look at each type of receipt paper. 

1. Thermal paper 

Thermal paper is very different from the usual white paper we use to write or draw on. What makes thermal paper special is a chemical coating on the surface of one side (also called the thermal side). When exposed to heat, the coating turns black and imprints an image or text. In other words, thermal receipt paper doesn’t need ink, ribbons, or toners – it relies on the heat-sensitive pigments in the chemical coating to generate receipt details. That’s also why these papers are called ‘thermal’! 

Thermal papers have a bright and smooth coating layer, so you can tell if your receipt paper is thermal or not by touching its surface. Another tip to identify thermal receipt paper is to scratch your receipt’s printable side. If it leaves a dark mark on your receipt, it is thermal receipt paper. Scratching produces enough heat to cause a chemical reaction and generate an imprint.  

A heat source near a thermal receipt paper

Source: Wikipedia 

Thermal paper is the most widely used type of receipt paper. You likely come across it daily as debit and credit card machines, ATMs, and POS systems all issue thermal receipt papers. For businesses that still use fax machines, those use thermal paper too. Thermal paper is popular amongst businesses because it’s cost-effective. There’s no need to pay for expensive ink cartridges to print receipts.

See also:

2. Traditional bond paper (wood-free paper)

Traditional bond paper, also known as wood-free paper, is a must-have item at many offices. Take a look in your office’s printer tray – there’s a pretty high chance there’s some A4-size bond paper in there!

When comparing bond receipt paper to thermal receipt paper, it’s easy to see the significant difference. Neither side of the bond paper has a coating chemical layer, so its surface looks less bright and smooth than thermal paper. As a result, the method of printing text on bond paper is different too. The nozzles of the printer’s printhead release liquid ink onto particular places on the bond paper as it goes through the machine. The paper absorbs the ink to produce receipt text in those exact areas.

3. Carbonless paper

Another option for printing receipts is to use carbonless paper. Carbonless paper, sometimes also called “No Carbon Required” (NCR) paper, comes in many formats, depending on the number of copies you need. However, it typically contains two or three-ply, and the top copy often goes to customers while business owners keep the rest for documentation purposes. 

A carbonless receipt paper roll consists of three layers: coated on the back (CB), coated on the front (CF), and coated both back and front (CFB). Carbonless paper is coated with small chemical capsules that enable it to generate copies without a carbon paper sheet. There are two types of coats: the back coat and the front coat. When someone presses or writes on the back coat, it reacts using minute capsules of ink. The ink capsules explode when the page is pressed, leaving a mark on the page below. Because these capsules are so small, they generate an exact replica of the writing on the top sheet. The front coat is constructed of a reactive clay layer that interacts with the ink to leave a lasting imprint.

Source: NextDay Paper

Is receipt paper bad for your health and the environment? 

According to Chicago Health, approximately 93% of thermal paper receipts contain hormone-disrupting chemicals bisphenol A (BPA) or bisphenol S (BPS), which our bodies can absorb when we touch the receipts. The chemicals have been shown to be harmful to reproductive systems in humans and animals and are related to obesity and attention disorders. You can find more information in the following studies:

Additionally, to create paper receipts each year, the U.S. uses 12.4 million trees, 250 million gallons of oil, and 13 billion gallons of water. It generates 1.5 billion pounds of waste and 4 billion pounds of CO2, according to the non-profit organization Green America’s research Skip the Slip (2018). What makes thermal receipt papers more problematic to the environment is that they cannot technically be recycled, as their chemicals would contaminate other recyclable paper products. 

Let’s go paperless! 

What can you do to reduce your exposure to thermal receipt papers? An easy way is to go digital. If you can ask for an e-invoice through email, go for it! Otherwise, if the business only offers paper receipts, you can use the Shoeboxed receipt scanner app (for free) to digitize it within seconds. Then, you don’t have to keep and handle paper receipts anymore! All the important data you need from the receipts are securely stored on your devices, minimizing your contact with receipt paper. With many other great features, Shoeboxed can also help you organize receipts in the best way possible! 

Try Shoeboxed right now for free! 

6 Reasons to Invest in Bookkeeping Management Software for Restaurants

A day in a restaurant is as hectic as you can imagine. Everyone working both front and back of house carries out activities to keep the business running including purchasing raw materials, food preparation, customer service, cleaning, accounting, reporting… and the list goes on! 

A restaurant manager is the one who ensures that things run smoothly and efficiently. The manager usually focuses on customer service and team management during opening hours. Yet they’re usually the one who ends up doing bookkeeping and reporting at the end of an exhausting day. The tedious and monotonous bookkeeping task is often overlooked and much more likely to fall to the very bottom of the priority list. This can lead to confusion and chaos when one inaccurate record occurs. 

Why do you have to make it hard when you can make it smart? Let’s make bookkeeping tasks less tiresome with the aid of bookkeeping management software. 

In this article, we’ll look into the importance of bookkeeping in a restaurant business, examine six reasons a restaurant business needs bookkeeping management software, and guide restaurant owners or managers in finding the right application to fit their business.

Why is bookkeeping important to a restaurant business?

What is bookkeeping?

We all know what bookkeeping is to some extent, but let’s break down what exactly we mean by bookkeeping before diving into why it’s important for restaurant businesses.

  • Bookkeeping is the practice of recording all expenditures and incomes, which demonstrates the cash flow in a business. 
  • Bookkeeping management involves recording all financial transactions such as material expenses, service expenses, payroll, as well as income (like customer or client payments for goods and services).
  • Bookkeeping is carried out regularly so that managers can track all information and money movements on their books to make key operating, investing, and financing decisions.

A bookkeeper is a person responsible for bookkeeping. Without bookkeepers, companies wouldn’t be aware of their current financial position, as well as the transactions that occur within the company’s walls. Many restaurant owners and managers take on their businesses’ bookkeeping management to save costs. The success of this task lies in restaurant owners and managers’ bookkeeping experience. 

Why should restaurants do proper bookkeeping?

Bookkeeping management is a crucial function in the restaurant business for both legal and financial management purposes. It allows you to track every detailed report about the restaurant’s revenue, food, labor, and operating expenses. Based on these, a bookkeeper calculates precisely how much the restaurant is taxed and processes it on time. 

It’s the restaurant’s legal obligation to pay tax and any restaurant owner and manager wants the tax procedures to go as seamlessly as possible. Proper bookkeeping management will save you plenty of time and work. It also ensures your business violates no obligations when it comes to money affairs. 

Restaurant owners and managers often overlook the importance of matters such as keeping records of every penny spent. Over time this leads to confusion or even huge losses for any restaurant business. 

Proper bookkeeping gives restaurant businesses a reliable measure of their performance. Thanks to that resource of information, you can get a snapshot of the business’ health and whether or not to adjust any operational activities. 

Make the switch to bookkeeping management software

Bookkeeping management software which can do the same job as a bookkeeper and costs only a fraction of a bookkeeper’s salary is considered a good solution for restaurant owners and managers. Thanks to such software’s efficiency, thousands of restaurants have switched to these digital tools  instead of hiring a bookkeeper .

6 reasons to invest in bookkeeping management software for restaurants 

1. Storage

A study has shown that restaurants generate more than 1.5 billion pounds of paper waste per year on receipts alone. Your business does contribute a part to that huge number. 

Paper receipts from customers and vendors can take up to 25% of a restaurant’s office space. Like other restaurant owners and managers, you may be keeping two or three copies of some documents and filing them in different places. This duplication creates waste and makes the workplace environment cramped and uncomfortable. 

By digitizing receipts and storing them in bookkeeping management software, you don’t have to worry about storage anymore.

2. Waste

Every business should be conscious of the environment. With many tree-based products being used and wasted, there’s an estimate that the majority of Earth’s rainforests will be completely gone within the next 100 years. Going paperless is every business’ responsibility to help save the environment and protect the Earth. 

Much of the paper waste produced by restaurants are customer bills and vendor receipts. You can help reduce these sources of waste by using bookkeeping management software. 

3. Supply cost

Paper-based records include the cost of paper and several sources of indirect supply costs. The indirect supply costs include costs of filing cabinets, printers and ink, and other stationery. 

Such costs for restaurants change depending on the season, with more papers issued during the busiest periods and fewer papers issued during off-peak seasons. 

With bookkeeping management software, the supply cost remains the same through different points of the year, thus saving a lot of expenses for restaurant owners.

4. Productivity

It’s hard to find the right piece of paper in a pile containing thousands of others. Even in the most organized workplace, it can still puzzle anyone searching for things, which slows them down. It can go from bad to worse if you’re in a rush and have to deal with difficult customers or merchants. 

A digital document archive with a powerful search function will greatly improve one’s productivity. Bookkeeping management software helps restaurant owners and managers cut off lots of time on finding documents, thus staying focused and engaged in more important tasks.

5. Accessibility

Easy data accessibility is one of the key qualities that restaurant owners and managers look for in their bookkeeping management software. With a huge customer and vendor database, extracting and analyzing information done by a bookkeeper for one specific request is nearly impossible. 

With bookkeeping management software, customer and vendor data has been extracted and stored in a place where you can search for it with a click. Thanks to this highly accessible feature of bookkeeping management software, now restaurant owners and managers can search their database in seconds. 

6. Security

Paper documents are susceptible to risk. Keeping piles of files on-site can introduce several risks, including an incident of fire, poor environmental conditions, and even theft. 

If your business office catches on fire, your paper records could go up in smoke. Floods, earthquakes, and other natural disasters can also result in the loss of important business documents. If records are stored in moisture-prone areas, they’re subject to mold. 

Therefore, off-site storage is a solution to protect important documents that many businesses look for. Unfortunately, restaurant records are not as secret and confidential as other financial documents, and restaurant owners and managers could not afford to pay a place at a professional records storage provider. Chances are they’ll look for something which can store documents safely and cost a reasonable price. 

Bookkeeping management software is an optimal solution. Files digitized and stored on the cloud are much safer than in their physical form. Besides, digital documents are protected using multiple security solutions, encrypted, and restricted to limited users who have been granted access. 

What is the best bookkeeping software for restaurants?

Now that you know about bookkeeping management software and its benefits, it’s time for decision making. Choosing the right one is essential because you’ll use it every day to track the money coming in and going out of your business. 

However, the variety of software available in the market can confuse and overwhelm any decision-maker. Ask yourself these questions and you can eventually come up with a clear picture of what you’re finding.

Identify your needs

Do you need a platform that allows you to track inventory, receipt, and sales tax or more direct concerns? Do yourself a favor by making a list of your bookkeeping needs and prioritizing them from least to most important. Understanding your needs before you start researching solutions helps you find the right software without any doubts or concerns.

Look for features that meet your needs

It’s easy to get starry-eyed about features. Don’t blame yourself for this because some software is made to catch the eye of many people. Escape distractions, return to your list of prioritized needs, and evaluate only the software that meets the majority of those needs.

Check your budget

What if bookkeeping management software is amazing, but it’s beyond your budget? Or you may find a hot deal that does not come up with the features you wish to have? All in all, you should figure out the ideal software you wish to have and evaluate whether or not it can fit your budget.

Make bookkeeping management software part of your business operation today

Bookkeeping management software developed by Shoeboxed is an ideal tool for professional accounts and small business owners.

With Shoeboxed, you can turn your receipts into data and organize, make reports and analyze your current financial position at any time and anywhere. 

To get the most out of your bookkeeping management, get started with Shoeboxed for free!