4 Quick Tips for Managing Business Expenses
However you look at it, expenses management is annoying. This is particularly true for sole traders, who are always busy running their business.
If you’re looking to save time on expenses management – and maximise the amount you can claim, follow these 4 quick steps.
1. Log every single receipt
This is important, because without comprehensive receipts you have no way to prove the expense.
Without authentication you many not be allowed to offset the expense against your income, which means you could end up paying more tax.
2. Capture receipts when you incur the expense
Did you know that ink evaporates off thermal paper (used for many receipts)? This is important, because it means that if you leave your expenses too long the ink will disappear from the receipt. Which means you can’t record it.
Not to mention the fact that procrastinating on your expenses increases the chance of losing a receipt.
Managing your expenses as you go therefore increases your chance of offsetting the maximum allowed amount.
(This is one of the reasons we incorporated the ability to photograph receipts into the Solo Expenses app, because it means it only takes you 5 seconds to capture the expense as you go along.)
3. Record who you entertain
This includes the person’s name, company and reason for entertaining.
Having this record will be immensely useful if the tax authorities re-open your return, for example, in 3 years’ time. A proper index of entertainment receipts provides a clear audit trail justifying your claims.
(Solo Expenses, for example, lets you record a voice memo, which becomes a permanent element of the expense. This means there’s no additional paperwork burden to maintain the record.)
4. Tag each expense to the relevant project or customer
It makes it much easier to prove the legitimacy of the expense if you can show how it relates to a project or customer.
As with entertainment expenses, maintaining comprehensive records protects your business from having to pay tax on dis-allowed expenses during a review of your return.