While expense management software makes recording, tracking and monitoring expenses easy, it's still essential to understand which expense receipts you should keep and why.
In this article, we’ll explore the different types of expense receipts, explain why you should keep them and provide some helpful tips for improving expense management.
Get started with ExpenseOnDemand today to automate your expense management.
An expense receipt is a document that shows proof of payment for business expenses. It should contain key details such as:
Many expense receipts come in paper form, but by using ExpenseOnDemand's mobile app to scan receipts, it's easy to make digital copies and manage expenses digitally.
A valid proof of purchase is any document that proves the purchase of a business expenditure. A proof of purchase can be used by businesses claiming tax deductions or for providing expense info to auditors.
Proof of purchase can also be used by employees claiming expense reimbursement from employers. Receipts are the most common form of proof of purchase.
One of the main reasons a business must keep expense receipts is to show tax authorities proof of their expenses when filing their tax returns.
In the UK, businesses must keep detailed records of expenses for tax purposes. This still applies if you are self employed or run a small business. Expense receipts are not only a proof of purchase but can also prove expenses are business-related.
When it comes to UK tax laws, HMRC requires businesses to keep detailed records of expense receipts for expenses employees are reimbursed for. For example, if an employee travels for business purposes, their employer must keep financial records of the expenses incurred during the trip.
Other countries have their own tax code, but most countries follow a similar process, where businesses must show receipts and documentation that prove their expenses for each tax year. For example, in the US, the IRS also requires businesses to keep and submit expense reports.
While submitting expense receipts is required by tax regulations, you can also qualify for a tax deduction by submitting your expense claim. If you fail to submit all of your expense receipts when paying your tax bill, you may miss out on tax deductions and pay more taxes than necessary.
Expense receipts are also needed for reimbursements. For example, if an employee goes on a business trip, they must submit expense receipts for hotels and flight tickets to get the appropriate reimbursement.
Providing fair reimbursement for expenses keeps your employees happy. In addition, you can also claim these expenditures during tax time.
With ExpenseOnDemand’s AI receipt scanning app, employees can scan paper receipts at any time, anywhere. Expense receipts are automatically uploaded to the software, making it easy to store receipts until it's time to fill out end of year forms.
In the UK, every company must provide the tax authorities with relevant information that proves all reimbursed costs. Businesses that attempt to make expense claims without supporting receipts and expense reports may face serious consequences, including persecution.
Receipts include the date of the transaction, merchant, the nature of the purchase, and payment method. Invoices, on the other hand, usually only include purchase and merchant information and don't show proof of payment. Therefore, submitting invoices without a receipt usually doesn't meet tax return requirements.
If you're worried about non-compliance, use ExpenseOnDemand's mobile app to scan receipts and send digitised copies to your accounting software. This makes for accurate record keeping, ensuring you'll have all the necessary proof of purchase documents at the end of the tax year.
Meal expenses are costs incurred for meals during business activities. This could include meals for client meetings. Meal expense receipts should include the date, purchase amount, description, and location.
Typically, meal expenses must stay within the limits set out by local tax laws. For example, in the UK there are regulations on what does and does not qualify as a meal expense.
Mileage costs are business-related travel costs for employees who use a personal vehicle. For example, small business owners may reimburse employees for the cost of using their car to travel to meet with clients or attend a conference.
Employees must record the date, destination, purpose of their trip, and total miles driven. Mileage allowance covers the cost of fuel, road taxes, insurance, and wear and tear for using a personal vehicle. According to UK regulations for the relevant tax year, specific mileage rates must be paid to employees.
Transport costs are costs that an employer may cover for their employee to travel to and from work, for example, public transport or ride-sharing services. Employers should record the date of purchase, mode of transport, origin and destination, and transportation cost.
A company should also collect receipts for business-related travel expenses. Business-related travel is any travelling solely for business purposes. For example, when flying to another city for a conference, flight tickets are a business expense.
Businesses should also keep accommodation expenses for employees travelling for business purposes. For example, if an employee is on a business trip and has to stay overnight, the accommodation is a business expense.
With ExpenseOnDemand’s receipt scanner app, your employees can scan receipts while travelling, digitise them, and automatically send them to the finance department for review.
Miscellaneous business expenses are any other expenses that don't fit into the above categories but are clearly necessary for the operation of a business. This could include:
Along with receipts for miscellaneous business expenses, also include documentation proving the expenditure is business-related.
When making a purchase in person, many businesses still provide paper receipts. Paper receipts have all the necessary information such as description of purchase items, date, and vendor, and are considered valid proof of payment. Many businesses also send invoices to their customers, however, invoices alone aren't valid proof of payment.
For those who are less tech-savvy, using paper receipts may seem more straight forward than digital receipts. However, paper receipts are easy to lose and it’s easy to make mistakes when manually entering data from paper receipts.
In addition, paper receipts can fade over time and storing them takes up a lot of physical space. Record keeping is also slower with paper receipts, compared to digital solutions that automatically organise expenses.
Expense reporting is also more cumbersome with paper receipts, since employees must physically hand over receipts to accounting.
Digitised receipts (e-receipts) are superior to traditional paper receipts in many ways, including access, storage, and tracking. With ExpenseOnDemand’s receipt scanner app, employees simply take a picture of paper receipts and the app will record all expense data in a digital format. The digital receipt is then securely stored on the cloud for easy access.
More and more business owners are switching to digital receipt management over paper receipts. Some of the benefits of digital receipts include:
Now that you understand what expenses you should keep track of and why, let's dive into some key strategies for effective expense management.
Automated expense management solutions like ExpenseOnDemand make it much easier to collect receipts and track your expenses. ExpenseOnDemand eliminates the need for manual data entry and automates the entire expense receipt process, saving you time and money and reducing manual data entry errors.
You can digitise paper receipts simply by taking a picture of your receipt with the receipt-scanning app. If you pay bills online, you can also upload your digital receipts to the ExpenseOnDemand system. ExpenseOnDemand automatically categorises expenses, giving you an accurate overview of your expenses and keeping your records ready for tax time.
ExpenseOnDemand also integrates with leading accounting software, making for a seamless connection between your receipt collection process and your existing systems. With ExpenseOnDemand you can also connect your company visa cards or other corporate credit cards, and your expense transactions will import into the system automatically.
All employees of a company are responsible for keeping their expense receipts. That means businesses must set clear company policies on how to collect receipts, allowable expenses, what information to record, and how to use software to make the process easier.
Set clear and understandable guidelines and offer additional resources, such as training, to help all employees understand the process for collecting receipts and submitting expense reports.
It's also essential to track the expenses your employees are incurring. Your company can use tools such as ExpenseOnDemand to generate detailed reports of expenses and gain valuable insights into spending patterns.
With expense management software you can analyse expenses and identify unusual spikes in spending. This makes it easier to track overspending or identify expenses that are miscategorised as business expenses.
Creating an expense approval workflow is one of the easiest ways to prevent unauthorised spending. With software like ExpenseOnDemand, businesses can quickly set up an efficient expense approval workflow, so that only allowable expenses are approved before payment.
With ExpenseOnDemand, you can give specific employees the responsibility to approve expenses. When other employees request approval for an expense, the approver can decide whether it meets the requirements of a business expense before approving the request.
In this way, a company can set expense approval rules to comply with tax laws and regulations, and make their expense management process more efficient.
One of the best ways for employers to improve expense management is to build a culture of trust and transparency around expenses. Every company should promote a work culture where employees are encouraged to report expenses and discuss their needs.
By talking openly about business expenses, it's easier to identify which expenses qualify as legitimate and which do not qualify as business expenditures. This can give all employees a solid understanding of expenses and help you avoid compliance issues caused by miscategorisation.
To make sure your expense claims meet the HMRC rules and regulations, receipts must include some key information:
Receipts for business expenses should also include the business purpose of the expense, either directly on the receipt or in attached documentation.
For example, if you're submitting a flight ticket receipt, then you should indicate that the flight was needed to attend a business conference. Companies must keep expense records for six years from the end of the accounting period.
For more detailed information, the HMRC provides a detailed guide on keeping expense records for tax returns.
Complying with your local tax laws and regulations is important for several reasons:
Tracking expense receipts can be complicated, but keeping receipts is essential in ensuring your business complies with your local tax regulations and your business receives the tax deductions it’s entitled to.
Understanding what receipts you need to keep and the information they should contain can make the process easier. And using software like ExpenseOnDemand can make the process significantly faster and eliminate errors that come with manual data entry.
Get started with ExpenseOnDemand today and simplify your receipt collection process.
Using a tool like ExpenseOnDemand is the easiest way to digitise receipts. With ExpenseOnDemand's mobile app, users can take a picture of their paper receipt and the software will digitise the receipt, using OCR technology to capture all essential details.
ExpenseOnDemand also comes with key features such as:
A business can still make an expense claim if they don't have the receipt. However, record keeping should be as detailed and accurate as possible, and you should aim to have receipts for every expense. In the case of an audit, if only a small percentage of your business expenses don't have receipts, but you have detailed notes, there usually isn't an issue.
In the UK, there are no rules on how a business must record its expense receipts. In most cases, a scanned receipt is completely valid for tax return purposes.
While it's important to keep a detailed record of bank account statements, they shouldn't be used as a replacement for receipts, since HMRC may not accept bank statements without supporting receipts.
Connect With Us
%201.png)
-transformed.png){kind=spacer}