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!

Does The IRS Accept Receipt Scan for Tax Deductions?

As the 2021 tax season comes to an end, the stress is starting to creep up on business owners. Preparations can be taxing on business owners, often involving numerous steps. This includes double-checking accounting records, going over their tax claims to make sure the final numbers are correct, and sorting through piles of receipts that they’ve hung onto to submit to the IRS. If you’re looking to streamline this process by digitizing your receipts, you may be wondering—does the IRS accept your receipt scans? can receipt scans legally support your tax write-offs the same as original paper receipts? 

We are here to put your mind at ease. 

The short answer to your worries is yes. Receipt scans are 100% legitimate and approved by the IRS. In fact, the IRS has accepted scanned and digitized receipts as valid tax records for tax purposes since 1997! As such, scanned receipts must meet certain requirements in order to be eligible. 

Read on to find out if your receipt scans have met all of the IRS’s requirements. 

What are the requirements for a receipt scan to be accepted by the IRS?  

According to the IRS, digital or scanned receipts must meet the following requirements:

  • Receipt scans are completely identical to their original versions.
  • Each receipt scan must exhibit a high degree of legibility and readability. 
  • You must be able to provide hard copies of the scanned receipts in the event of an IRS audit.
  • Scanned documents must be stored in a secure place.

If you can ensure your scanned receipts are properly stored and backed up, and you can reproduce hard copies from them in a legible, readable format, you may dispose of the original receipts. 

You might also be interested in: Understanding the IRS’s Tax Underpayment Penalty and How to Avoid It.

What is the most effective way to scan your receipts? 

If you’re looking for an easy and convenient way to scan your receipts, Shoeboxed is what you need. Since 2007, Shoeboxed has helped many accountants, freelancers, and businesses scan, digitize and store their receipts safely in the cloud. Simply scan your receipts with your phone with just a click, and perfect digital versions of your paper receipts will appear in your Shoeboxed app!

On top of that, Shoeboxed automatically extracts, categorizes, and human-verifies important data from your receipts so that you can go over and check your records anytime with ease. 

In case you have too many receipts and too little time to deal with them, send your piles of documents using the Shoeboxed Magic Envelope, and the Shoeboxed team will take care of the rest. Just send and watch them transform into organized digital data.  

Quick, reliable, and trustworthy, Shoeboxed guarantees that the digital versions of your receipts are in precise format, audit-ready, and accepted by the IRS in the event of an audit.
Try Shoeboxed right now and get 25% off all plans

Checkout Conversion Rate: What Is It? And How Can Online Businesses Improve It?

Income is the bloodline of every online store. There are many factors that influence an e-business’s profitability. Today we will introduce you to an element that has a great impact on your business: checkout conversion rate.

Let’s say that your online store has hundreds of visits per week, but only a few of them make a purchase. How can you persuade more of your visitors to buy your products? Read on to find out what checkout conversion rate is and strategies to improve eCommerce conversion rate. 

What is a checkout conversion rate?

The checkout conversion rate is an important metric for every e-commerce business to follow. It refers to the percentage of customers that start and finish the checkout process in a particular amount of time. 

Online businesses can monitor patterns and inconsistencies by tracking conversion rates on their checkout page over time. With this approach, e-businesses will be able to learn more about which components of the checkout experience resonate with their consumers and which might be improved. As a result, a slight improvement in checkout conversion rate can substantially increase income.

Shopping cart abandonment is directly linked to e-commerce checkout conversion rates. This represents the percentage of consumers who add products to their shopping cart but never finish the transaction. We’ll learn more about shopping cart abandonment in the next section.

Why do customers abandon their shopping cart?

Cart abandonment is a common issue. For one reason or another, customers often leave an e-commerce site without making a purchase, even when they’ve put goods in their cart. According to research company Baymard Institute, the average cart abandonment rate is 68.8%, which means that nearly seven out of ten customers have put items in their cart but don’t finish the transaction. 

Here are some common reasons:

  • High extra costs (shipping, tax, fees, etc.) 
  • Too much information required
  • Slow delivery time
  • Complex checkout process
  • Lack of trust in website security
  • Want to save the items for later
  • Lack of preferred payment option
Reasons for shopping cart abandonment ( Source: Baymard)

You may also be interested in:

4 strategies to improve checkout conversion rate

  1. Convert to a single-page checkout process

The checkout procedure should be as quick and smooth as possible for your customers. People are busy, and whatever you can do to save them time and speed up the process will help you secure a sale.

This is when a one-page checkout comes in handy. Here are some benefits a single-page checkout process offers: 

  • It’s shorter and gives customers an incentive to complete the transaction.
  • It has all the fields on the same page, avoiding unnecessary complications for users.
  • It requires fewer clicks. Behavioral research shows that the fewer the number of clicks required to complete an action, the higher the conversion rate.
  • It reduces the chance of website errors occurring between one checkout page to the next. 

The famous hypermarket Walmart has an excellent single-page checkout. It has a 3-step process with each step including a minimal form that is easier to navigate. 

Walmart single-page checkout (Image source: Ecommercebooth)
  1. Skip the mandatory sign-up

Due to the fear of personal data being leaked or tracked, online shoppers are becoming increasingly hesitant to provide their personal information to your website. Though customers may enjoy your items enough to purchase them, only a small percentage of them want to register an account right at the start of their buying journey.

Despite this, many e-commerce businesses continue to force their potential buyers to create an account for user information collection and to send newsletters. Rather than being excited to take advantage of a newsletter with deals and promotions, this forced account creation may actually lead to prospective customers giving up on buying altogether.

If you’re concerned that you won’t be able to develop a user database without mandatory sign-ups, keep in mind that you can always request a buyer’s contact information during the checkout process. The essential thing is that you give them an option, not an obligation.

If customers had a good shopping experience, they’ll come back and realize the value of having an account. You can also send them emails to encourage them to join your program.

  1. Offer free shipping

The delivery fee is one of the most common reasons for online shoppers to abandon their shopping carts. Customers visit a store and put items into a cart, but at the end of the checkout process, if they discover that they don’t qualify for free delivery or that the fees are too high, they will ditch the deal. 

Free shipping is what most online shoppers value. Shoppers are thrilled when they find a good deal and will take advantage of every opportunity to save a few dollars. Therefore, though it involves a cost for online businesses, offering free shipping significantly boosts eCommerce conversion rates. Besides, it’s not too difficult to calculate and work in the price of shipping into the product price

  1. Use shopping cart recovery emails

Sometimes, all it takes to bring back a customer to your site and entice them to complete their purchase is a little push. Enter shopping cart recovery emails. These shopping cart recovery emails are emails sent to a visitor who has abandoned the checkout process halfway through with the promise of a special deal or promotion for them to close the purchase.

Shopping cart recovery emails are incredibly successful. According to statistics, 46.1 percent of all such emails are opened (the mean open rate for all emails varies from 10-25 percent across industries). One out of every eight of these emails is clicked, and a third of those clicks result in a sale.

To get the most out of a shopping cart recovery email, online businesses should tap the customer when the lead is still “warm.” Typically these emails are sent 1-3 hours after the abandonment when your brand and your product is still fresh in the visitor’s mind. One important note is that you should check the items they’re interested in are still in stock before sending out these emails.

The bottom line

To every online business, the checkout conversion rate is a key metric that affects their ability to turn visitors into customers and close sales. That explains why e-businesses always look for methods to improve this point. For those looking for tactics to increase checkout conversion rate, following the advice you read in this article will be just what you need.

If you’re interested in entrepreneurship stories, business tips, or productivity tools, find more posts like this on the Shoeboxed Blog. Shoeboxed is a cloud-based software that helps businesses turn their massive paper receipts into digital data. With Shoeboxed, you can accomplish a variety of tasks: scan, store and organize receipts, manage business expenses, store business cards and even track mileage for business travelers. It’s simple to install and easy to use. Have a look at Shoeboxed now and see how it can transform how your company works.