Why Small Business Owners Make a Mistake by Not Keeping Receipts
As a small business owner, you’ve got a lot going on. You're likely juggling operations, sales, customer service, and finances. It's easy to overlook what you consider to be minor details: saving your receipts. But failing to keep proper documentation for your business expenses is one of the most common, and costly, accounting mistakes entrepreneurs make.
Here’s why not keeping receipts can hurt your business more than you think:
- Inaccurate Financial Reporting
While this can be the case if you are personally doing your own accounting, this is 100% the case if you are paying someone to do your bookkeeping.
It’s mind-boggling how many times I’ve heard the following conversation:
Owner: This transaction here is classified wrong. Why?
Bookkeeper: I asked you for the receipt 3 times and never got it. Finally, in order to close the month, I had to put it somewhere, so I made my best guess.
If the issue were just 1 transaction, any decent bookkeeper would personally reach out to at least ask what the transaction is for. Unfortunately, the reality is usually the majority of the transactions are being categorized without a receipt. Even the best bookkeeper in the world can make a mistake when having to guess at hundreds or thousands of transactions per year.
- Improper Budgeting
I’ve met some small business owners who don’t care too greatly about how each expense is categorized or if one or a couple are wrong. However, I’ve yet to meet one who didn’t care about being able to make informed decisions about where to cut costs or invest more.
The simplicity of this seems too obvious to state, but it’s just not possible to make accurate and intelligent decisions about your spending if you don’t know what you’re spending your money on.
- Your Team Plays Follow the Leader
Raise your hand if you’ve heard this from an owner: “If they can’t provide the receipt, charge it back to them personally.” Doing this is great in theory, and it can work great in practice. But the truth is the team is learning to not submit receipts from their leader, whether that’s a manager or an owner.
The team knows whether an owner or manager submits receipts and they also know what level of punishment is placed on them when this isn’t provided.
The culture of accountability starts at the top.
- Digital Tools Make It Easier Than Ever
I’ll be the first person to admit I’m not the most App-Friendly phone user in the world. I’ll also be the first person to say there is no good excuse to not provide receipts anymore.
Apps like Expensify, QuickBooks, and Zoho Expense and many more allow you to scan and store receipts digitally. Many even integrate with your accounting system and automatically categorize expenses and the ones that don’t provide simple and easy ways for the user to add details about transactions that are provided to your bookkeeper.
Providing receipts is now only slightly more complicated than taking a picture with your phone.
- Potential Tax Consequences
The IRS requires documentation for business expenses if you want to claim deductions. Without receipts, your ability to prove those expenses is significantly weakened, which could lead to missed deductions, and, more likely, audit issues.
While the goal is to not get audited, small business owners often look for every possible write off they can get. If you’re audited and can’t back up your deductions, the IRS may disallow them—leading to back taxes, penalties, and interest.
Receipts are your best defense. They support your claims and help reduce your taxable income legitimately..
Final Thoughts:
Keeping and providing receipts might seem like a tedious task, and it’s definitely not as sexy as selling the next big account, but it’s a foundational part of sound business accounting. It
