Sometimes we get receipts from clients that don’t make any sense or it is unclear how the thing purchased relates to the business. When this happens, it is very difficult for us to allocate the purchase accurately (or at all).
To solve this problem, we encourage you, our client, to annotate receipts before sending them to us or sharing via your electronic folders. You don’t have to do this for all receipts – some purchases are self-explanatory, such as fuel or stationery. However, for those receipts which are a bit cryptic, it would be really helpful if you could write some brief notes about the purchase on the actual receipt. This would make the allocation process much easier for us.
What do we mean by cryptic?
Well, an example of this would be a receipt which has a price, a date, a supplier name and not much else like the one below. We would be unable to allocate this purchase due to lack of information.
Another “kind of cryptic” would be a receipt for a purchase that to us, does not appear to be tax deductible. An example of this could be a receipt for a cake purchase. Generally a cake is not tax deductible and without prior knowledge of why the cake was purchased, we would not be able to include the purchase as a business expense. However, if a note had been written on the receipt that the cake was for morning tea for an employee’s birthday, then we would be able to code the expense correctly.
Another big one is cafe, restaurant or general food receipts. We are often given receipts for coffee or meals at restaurants and basically don’t really know if they are business-related or just personal. If you think the purchase is related to your business, you must tell us how and the best way to do this is write a note on the receipt. It could be a business meeting or simply a meal whilst travelling but unless you communicate this with us, we will be unable to code the expense correctly. In fact, there’s a good chance it will end up in your drawings/director loan account i.e. no tax deduction!
Lastly, let’s talk about all those “travel” receipts. When we receive receipts that you indicate to us are for travel, we need to know specific things about the travel to help us record the expense properly in your accounts. It’s no good just saying for example, “that’s parking” or “that’s accommodation”. Usually it is quite obvious to us what the expense is but what is not so obvious is the “story” behind the expense. What we really need to know (and what your accountant also needs to know) is:
why you travelled
where you travelled
how the expense relates to the travel
We suggest that you get into the habit of annotating the above details on your travel receipts. If you have many receipts relating to the one trip, pack those receipts into an envelope and write the details of the trip on the envelope before sending them to us. If you are sharing your receipts with us electronically, then create a special folder for the trip and pop those receipts in that folder. Include a document in the folder which includes the details of the travel. Not only will this help us immensely, but this is good record-keeping practice and a requirement from the ATO in order to substantiate your travel-related tax deductions.
So to help us get your accounts right, it would be awesome if you could start making notes on those “iffy” receipts. Look at each receipt you have and if you think more information is needed, then get writing! Doing this before giving them to us would be so helpful and make our job much easier. More importantly, this will mean that your accounts will make more sense, providing you with a clearer, more meaningful picture of your business story.