If you’ve got lots of receipts and invoices lying about it can seem like a daunting task trying to get through them all – you wish the pile would just decrease on its own, don’t you? Maybe just leave them, they’re only small amounts anyway, yeah?
Uh, no! Small amounts add up to bigger amounts and every little expense helps reduce your tax bill, so it makes sense spending a couple of hours sorting them out.
And, before I give you some tips to get through them without the need for any form of intravenous let me reassure you it’s easier than it looks.
Ready? Let’s get that bookkeeping all up to date so you know exactly where your finances are and nothing will come as a shock and you might even be able to treat yourself because you have more money than you thought – or me, you could treat me because I was the one who helped.
Gather all of your receipts and invoices and divide them into two piles: card payments and cash payments. You could even get a small child to do this for you.
If you have more than one card, divide the card pile further into the separate card purchases.
(and next financial year stop using more than one card it just adds extra work for you)
Now, divide the piles into months.
So, all of the September purchases together and all of the October purchases together, etc.
Don’t worry about knuckling it down to be in date order as well, just in their individual months is fine.
You may well be exhausted by this point so by all means put some paperclips around them, move them away from any pets or kids with matches and go and have a sit down for ten minutes – only ten minutes!
If you are using an online accounting system then all you now have to do is photograph the receipts on your phone and move on to step four…
If you’re not using an online accounting system keep reading, I’ve got a solution.
Next step is to upload the pictures of the receipts to the accounting system and match them to the expense / transaction.
You’ll also need to attribute them to a specific expense category, for example:
Printer cartridges, photocopier paper, notebooks, etc come under ‘Stationery‘.
Monthly direct debits for Google Drive, FreeAgent, etc come under ‘Computer Software‘
Starbucks while out at a client meeting comes under ‘Accommodation and Meals’
Avoid using ‘Sundries’ as HMRC aren’t keen on this. Everything really does need to be explained as to why it’s a business expense – if you’re not sure it is then how are you going to convince HMRC?
Once you’ve saved and matched all of your receipts into your accounting system you can simply throw away the paper copy of the receipts!
No, I am not bonkers – you can! A picture, photocopy or scan of a receipt – providing everything is legible – is more than okay for accounting purposes and for HMRC.
Not using an online accounting system yet?
If you’re not using an online package don’t worry just yet (at the time of writing this blog Making Tax Digital was not yet in effect) you can put everything into an Excel document for now.
If you use an accountant, check with them first to see if they want you to list everything in a certain way. If they’re happy for you to have free reign or you don’t use an accountant I recommend having the following columns in your spreadsheet:
- Date of transaction (just put them in any old way you can sort them in chronological order later)
- Method i.e. cash or card
- Cost (if you’re not VAT registered don’t worry about listing the net and VAT, just put the Gross)
- Category (as mentioned above, stationery, computer software, etc.)
List all of the transactions on the spreadsheet and match them against your bank statements. Crossing off all the transactions you have a receipt for. Any that are left you will have to find a receipt, or put it through as an expense but note that the receipt is missing – HMRC will if they audit you advise whether it can be claimed.
Bonus top tip:
If you’re ever unsure about anything to do with your finances or accounting always check with an accountant, I see so many people ask questions in Facebook groups and some just take the first answer they like – HMRC don’t tend to work like that, so fact check with reputable sources only. The gov.uk website is also always up to date, or HMRC on Twitter are always extremely helpful and quick to respond.
If after reading this you still don’t want to tackle your receipts then it might be time to outsource to a bookkeeper and I can help with that.
Wondering how virtual bookkeeping works? I’ve got that covered too: How Does Virtual Bookkeeping Work?