Lost receipts for business expenses

If you are a small business owner, keeping an account of expenses can be a laborious task. Due to your hectic schedule, you might find little time to consolidate your expenses and record your receipts in an orderly, timely manner.

However, it is during the tax season that your nightmare will unfold. You will find yourself working through a maze of receipts, which have incomplete details, to determine your business expenses.

This could have very dangerous consequences, as your tax return could be in peril. The fact of the matter is that receipts have to be taken seriously as they serve as an audit protection.

Do I need a receipt for tax deductions?

In most cases, you’ll need a receipt or similar proof of purchase for any business expenses that you wish to claim a tax deduction on.

According to the Australian Taxation Office (ATO), receipts or comparable documentation should include all of the following information:

• The business name of the supplier
• The total amount of the expense or cost of the asset
• A description of the goods or services you’re buying
• The date of purchase
• The date the receipt or document was produced

That said, the ATO allows taxpayers to claim up to $300 in expenses as a tax deduction without a receipt. This means if you bought business-related items but didn’t keep a receipt or relevant documentation, you can claim up to a maximum value of $300 per year (in total, not per item).

What to do if I lost my receipt?

When tax time rolls around, finding out you’ve lost a business expense receipt can trigger panic. The good news is you might be able to get a copy of the receipt by contacting the supplier you made the purchase from. 

Give them the details of the purchase, including a description of the item, the date, the purchase amount and any other relevant information. Many suppliers will issue a duplicate receipt or proof of purchase.

Can you claim an expense without a receipt?

Generally, it’s important to keep all receipts for business-related expenses. However, the ATO allows taxpayers to deduct up to $300 in expenses without a receipt. 

Even if you don’t need a receipt for small business purchases, it’s a good idea to record your expenses so you can stay on top of your spending throughout the year. Small business accounting software like QuickBooks makes it easy to track business expenses, so you always know where your money is going.

How to get proof of purchase

As a first step, if you’ve lost a receipt it’s worth checking with the supplier to see if they can issue a replacement. If not, there are a few other ways to show proof of purchase:

Bank statements

Although bank statements generally don’t itemise purchases, they do contain important transaction details such as the date of purchase, amount and the supplier’s name. This can serve as proof of purchase in situations where you’re unable to obtain a full receipt.

Emails

Purchase confirmation emails can be used as proof of purchase, and in some cases, are accompanied by a tax invoice attachment. Keep your business emails organised in relevant folders so you can find the right information easily.

Photos and notes

As a last resort, check to see if you have a photo of the receipt or the purchase, or any notes related to your expense that can help you track down full proof of purchase. With QuickBooks expense management software, you can take a quick snap of receipts from your smartphone and turn them into digital files so you never have to worry about keeping a paper trail.

Can you claim a tax deduction without a receipt?

In some cases, you might not need a receipt to claim a tax deduction. This may include expenses such as:

Small cash expenses

Expenses up to a total of $300 can be claimed without a receipt as long as they are business-related. These could include minor cash expenses such as office supplies or parking fees.

Travel expenses

You may be able to claim a deduction for travel expenses without receipts, but you'll need to keep a travel diary or similar record. This should include details of your business-related travel including:

• Where you were
• What you were doing
• When you stopped for meals
• The date, and start and end times, of each activity

If you’re travelling for business and personal reasons, a travel diary is especially important because you can only claim a deduction for the portion of expenses related to work. 

Working from home expenses

Depending on the nature and structure of your business, you may be able to claim a deduction for working from home using the fixed rate method rather than keeping receipts for running expenses.

With the fixed rate method, you may be able to claim 67c for each hour you work from home during the financial year. You can find out more about the fixed rate method on the ATO website.

Risk of unreported receipts

If you give second-hand treatment to receipt handling, you are likely to put your business in a precarious position. The careless act of losing receipts by not storing them in the right manner or failing to proactively update them as business expenses has tremendous implications.

Firstly, it invariably leads you to inaccurately underestimate the company expenses and inflate the revenue and profit figures.

In all likelihood, if the expenses are understated, you will tend to overspend and commit yourself to investments that the company cash flows cannot afford. You could land up in high bad debt. Cheque bouncing is one of the common incidents in this type of a scenario. This is also considered a criminal offence in some countries.

Secondly, you can be charged with fraud, and the reputation of your business can be at stake, if you unknowingly declare flawed revenue and profit figures to your stakeholders.

Lastly, you will have no choice but to pay a much higher tax as you will not have the ample receipts or documentation to prove that your expenses were business related.

Cardinal rules of receipt keeping

So what are the must-dos that business owners – like you – should keep in mind while handling your expense keeping?

First and foremost, you must keep all your work-related receipts. These can then be used as evidence for your business expenses during tax time.

However, it is not only about having all the receipts, but also ensuring that all the receipts have the requisite details to explain their purpose.

This comes handy for you, especially when you have to claim company expenses for entertainment and food. For instance, name of the employees or clients who were part of the event, the respective job titles, the date of the event and the venue should be recorded next to the receipts.

Secondly, you might have a credit card that is specifically assigned for business expenses. However, storing only credit-card statements will not be sufficient for your record keeping.

Since these statements are never itemised, all purchases will look like large lump sums. Hence, please ensure you have a register receipt to accompany your credit-card statements.

Thirdly, all of us know that the ink on the receipts fade away with time. Since most tax authorities expect business owners to have their company records for up to six years, it is best to scan your receipts or better still, take a photo.

Lastly, while credit-card and debit-card expenses get documented, pure cash transactions are far harder to track and can sometimes be forgotten and not accounted for. Hence, it is vital for you to get receipts from the vendor for every cash transaction.

Optimal management of receipts

Though receipts are very important, there is no denying that managing them is a painstaking process that requires piles of physical receipts, numerous spreadsheets and endless administrative time.

If you are working out in the field or are away on business travel, you might find it difficult to update your receipts on the company system, unless you are back in the office.

However, there are technology solutions in the market with online platforms to help you streamline your expenses. These solutions work seamlessly on any mobile device, which is a boon for people who are engaged in offsite work, or are out on business travel.

You can  upload your receipts on the go , as and when you incur a business expense.

There are online tools, such as  QuickBooks Online , where users can categorise their expenses, be it a small expense such as office supplies, mileage and meals, or big purchases such as extended international travel.

You can digitise your receipts in real time when you are inputting your expenses, thus relieving yourself of having to reconcile your receipts manually.

Expense management platforms also allow you to set parameters on your company’s expenses.

For instance, when a receipt is uploaded, the software will do a check on whether it meets the requirements of a business expense, and accordingly accept or reject it.

This way, both you and your employees are saved the hassle of manually going through the company approval process.

If you follow the fundamental requirements for receipt keeping, and use a technology platform to manage your receipts, then all it takes is a click of a button to accurately display your business expenses. Rather than a storm, the tax season will then be a pleasant breeze for you.

To read more articles relevant to small business finance, visit here. 

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