Does the thought of organizing your receipts fill you with dread?
We get it. It can seem overwhelming to keep track of your receipts on top of the demands of running your own business.
It may not be at the top of your list, but if you’re self-employed or a small business owner you are required by law to keep a record of your transactions. If you keep good records, you will avoid Canada Revenue Agency (CRA) fines in the event of an audit.
Plus, putting in the work now means you’ll save time when it comes to filing your taxes.
We’re all about making tax season as easy as possible, so we’ve outlined seven tips and tricks to help you keep on top of those records.
Use a business account and credit card
It's easy to lose track of cash transactions. Instead, use a credit card or debit card to cross-check your receipts. It’s a good idea to have a separate business account and credit card so you don’t mix personal and business expenses. As a bonus, if all transactions are business related, you can claim any associated expenses with that card or account. For example, the annual fee on a points card, or the interest from a balance carried from one month to the next, can be claimed if the transactions are business related.
Save your receipts
The CRA won’t accept your bank or credit card statements to justify deductible business expenses - you need an itemized receipt that corresponds with the transaction. The CRA calls these itemized receipts “source documents.” Hang on to those receipts for at least six years after your last Notice of Assessment, which is as far back as the CRA will ask to see them in the event of an audit. You can keep the physical receipts or digital copies.
Spend time reviewing your receipts once a month
Bryon Spence, FBC’s Western Business Development Manager, recommends sitting down for 30 minutes every month to review and categorize your receipts. This keeps things manageable as the year progresses and keeps you on top of your spending, so you don’t miss out on any tax deductions. He advises small business owners to purchase an accordion folder every year to house all business receipts. These inexpensive folders are easy to obtain and allow you to organize your receipts by category and year, so finding a specific receipt is a snap in the future.
Make notes on the back of receipts
For meal and entertainment receipts, write who you met with and the purpose of the meeting on the back of the receipt right after the meeting. That way you’re not struggling to remember details later. You can deduct 50 per cent of your total meal and entertainment expenses for business purposes.
Back up your receipts
Since receipts tend to fade with time, we recommend you keep a digital copy of each receipt. A good practice is to snap a picture of each receipt on your phone which you can upload to a central location later.
“Software like Kashoo allows you to take a picture and digitize the receipt on the spot, then you can throw the hard copy in the accordion folder,” Spence says. “If you only need to track expenses, like a realtor, Mint.com is a good option, and it's free.”
Get ahead of tax season
Our own app, FBC Tax Advantage, is a free app that’s part of our Membership model and gives you the ability to track, manage and store your tax slips, medical expenses and charitable donation receipts. Throughout the year, you can snap, save and forget about it, since FBC will take care of it and attach the receipts to your tax file to make sure you’re not missing out on any deductions.
Disclaimer: The material above is provided for educational and informational purposes only. Always consult a tax professional like FBC regarding your specific tax situation.