Decluttering and clearing out your space are habits that help keep everything in order. Often, we do this with documents as well, especially receipts. We make transactions almost every day, and these receipts accumulate over time. So the paper trail can be quite annoying. This pile of receipts may be tempting to throw out, but hold your horses, especially if you are running a business!
Though we may consider stacks of paper messy clutter, they must be filed and kept. That includes receipts for your business. Though they may no longer spark joy, do not “Marie Kondo” or haphazardly throw them out. This is because the Bureau of Internal Revenue (BIR) requires that all books of accounts and subsidiary accounts be kept in storage for 10 years.
Those numbers may seem like a long time for a couple of leaves of paper, but there is good reason for such protocol. Here is why it is important to keep your financial records, written or electronic, in storage.
1. Offer Solid Evidence of All Transactions
Receipts are important as they provide proof of transactions. Moreover, keeping receipts be reflected in more accurate books of account. Bookkeeping and accounting are the lifeblood of any business. Besides, these receipts also help you prove your case should the BIR request to audit you or your firm.
Notably, since some receipts are kept in thermal paper, make sure you take an electronic copy to preserve the vital details in case you must address a complex investigation. Remember, the burden of proof when it comes to auditing is always in your hands.
2. Monitor Financial Progress and Expenses
Invoices and receipts are great for bookkeeping and tracking business expenses. Not only that, but they help you see the financial progress of your company, as you will be able to use this financial data to calculate financial ratios and evaluate indicators. When you keep these receipts, you have important reference documents and make decisions grounded on facts.
3. Aid in the Preparation of Tax Returns
The main reason for keeping receipts is so they may be used in the computation of your tax return. For example, you have deductibles to claim to lower your tax dues; you need to present supporting evidence for your claims. Having this vital information in your accounting records will ensure you can support your tax avoidance measures.
Usually, accountants oversee keeping proofs of transactions for a long period of time; but you may keep copies on your own for at least 5 to 10 years. It is also advised that you store your receipts both on paper and electronically to allow for cross-checking and to make sure that in the case one copy gets lost, you always have a backup.
4. Aid in Filing Disputes and Demanding Service Warranties
In this advanced world, online transactions have become more common as they are convenient and can be carried out through a couple of taps of a finger. However, online transactions also expose you or your firm to certain threats, like online theft and scams. And this is where your receipts can come in handy.
Keeping copies of your receipts will help you in disputing scams and theft that may occur when making online purchases. It may also help you file for amendments to a transaction if you have been double charged. On top of that, it can help you secure service warranties should faulty merchandise fail to meet its expected lifespan.
5. Provide Useful Information to be Used in Business Planning
As previously mentioned, keeping your receipts allows you to have more accurate bookkeeping and accounting records, leading to more precise indicators of financial progress. As such, this will aid in making data-driven decisions that will help you meet goals and drive you towards success.
Having to keep receipts may honestly seem like a hassle but making it a habit to collate them will reap you more benefits than not. In fact, foregoing BIR guidelines that suggest you keep your receipts may backfire and do you more harm than good. Therefore, it is always better to follow these rules to avoid being caught in more troubling situations.
If you need help collating and organizing your receipts, our team of CPAs can help you with the bookkeeping, accounting, and auditing processes of your business. With our assistance, we can make sure your company stays fiscally healthy. On top of that, we can help with tax compliance to assure you meet BIR regulations and keep penalties at bay. We offer free 30-minute consultations so give us a call and let’s find solutions to your concerns.