At this time of year, with tax season in full swing, we often see clients that we have not seen since last year at this time. They come to us with their receipts and paperwork for the entire past year and ask us to record their bookkeeping in preparation for tax filing.
One of the most asked questions we receive from these clients is “What can I do to be better organized for next year?”. I know just by hearing that question what it is they have been going through before arriving in my office. They have just spent countless hours going through a mountain of paperwork to get it into some type of order before bringing it in to us. They have waded through piles of small cash register receipts (probably already fading) looking for that hard to find date just so they can put it in the right pile! How stressful, time-consuming and boring!
Here are a few quick tips to help you stay organized throughout the year and to help preserve those important receipts:
1. Develop a simple routine for dealing with paper (including receipts) as soon as it comes into your hands (and follow it!)
Maybe one of these ideas will work for you:
- Keep a day-timer, envelope, pocket divider etc. in your vehicle. Every time you get into your vehicle after having just made a purchase, put the receipt in it. Do it EVERY time so it becomes a habit and eventually you do not need to think about it.
- Keep monthly folders in your house or office. For each bill paid, each receipt received, each invoice you’ve sent, put it in the folder of the appropriate month. When the credit card and bank statements come for that month, put them in there too. If you use the first routine, this would be a good time to empty it out and include them in the monthly folder as well – that month is now ready to take to your bookkeeper.
- Keep all of your paperwork in one place – use a file cabinet, bankers box, plastic file box. That way you never have to think about where you might have put a receipt, statement or invoice and you will never have to waste time looking for one that has gone astray. (If you have ever torn your truck apart looking for that one missing receipt, you will understand how important this is!) If you take your paperwork to a bookkeeper once a year, then everything is together in monthly folders all in one place. Pick up the box and go.
2. When you get a receipt, look at it, fill in any missing or faded information and write on the back what it was for – DO THIS ON THE SPOT!
There are many cash register receipts that do not provide details of the purchase – you think you will remember what you bought there, but you won’t. Sorry – but its the truth – you will not remember! Take a moment or two to make a quick note of what the items were if they are not listed on the front in a way you can understand. Often the abbreviations of the purchased items make sense to you at the time, but 12 months later they may not. Your bookkeeper may not be able to determine what the purchase was for either if they are trying to decipher the codes and abbreviations.
There is nothing more frustrating than trying to decipher a date or a product long after the fact when it is finally time to begin the data entry. Dates can be particularly annoying as different businesses have the date setting on their receipts in different orders. Is 01-08-14 January 8th or Aug 1st? Write the month on the receipt when you receive it. (Then take it home or to the office and put it in the correct month folder from above!)
This is an especially important step for meal receipts. CRA requires the following information on every meal receipt:
- who was in attendance
- the purpose of the meeting
- what was discussed pertinent to your business
3. If you must fold a receipt, fold it so the printed side is uppermost.
That way, it will be easier to find the receipt of you ever have to look for it. When you fold a receipt so that the printed side is hidden, all receipts look alike and you will have to unfold them all to find the receipt you want. Not to mention it takes your bookkeeper a much longer time to sort through your receipts when they all have to be unfolded first!
4. Don’t let the data entry pile up.
If you have a bookkeeper, deliver your receipts on a regular basis. Weekly, monthly or even quarterly throughout the year. If your bookkeeping is done on a regular basis, then any questions that may arise will be easily remembered and clarified in the data entry. Trying to remember what that January 2013 expense was for when you are in February of 2014 can be stressful and difficult.
If you are doing your own bookkeeping and data entry, schedule a time every week or month and stick to that schedule. If you don’t, you will likely put it off and your piles of receipts will become even more unappealing and overwhelming. You will always find something more important and interesting to do if you don’t schedule a time and force yourself to do it.
Follow these 4 steps and you will find that your paperwork will be better organized, it will be much easier to lay your hands on the exact receipt or invoice you are looking for and the stress at year end will be far less. Happy sorting!