Expense receipts: What counts as valid proof of purchase?

As much as you’d like to centralize your business spending, there are times it makes more sense for your employees to make purchases on the company's behalf. That means managing employee expense reports is a regular routine.

Expense receipts are a core component of these reports. Expense report receipts provide the documentation you need to manage expenses, justify company spending, set realistic budgets, reimburse your team, and prepare for audits.

In this article, we clarify what qualifies as a valid expense receipt for reimbursement and tax purposes and how to ensure your records are audit-ready in 2025 and beyond.

What is an expense receipt?

An expense receipt is a document that serves as proof of purchase for a business expense. If an employee makes an out-of-pocket purchase on behalf of the company, they need to submit an expense receipt to be reimbursed. The receipt should show the date, vendor, purchase price, and description of what was purchased.

Receipts play a crucial role in expense tracking and provide documentation for potential business tax deductions during tax season.

Why expense receipts matter

Receipts serve many roles in business accounting. These are just a few reasons why you should require receipts as part of your expense reporting process:

• Proof of an expense for reimbursement: Receipts for expenses verify an employee's claims to ensure they’re properly reimbursed for business-related spending. Requiring employees to attach receipts helps ensure that every transaction complies with your company’s expense policy and reduces the risk of expense fraud.
• Tax filing and compliance: Expense receipts serve as documentation for your tax deductions. They provide a paper trail for the IRS receipt requirement to verify that the deductions you claimed on your tax returns are legitimate.
• Internal and external audits: The risk of an audit or lawsuit is a major incentive to develop an organized system for collecting and maintaining receipts. This ensures compliance with tax regulations and helps avoid potential legal issues.

Expense receipts aren't without their challenges. It can be easy to lose paper receipts, making it challenging to document expenses for reimbursement. If receipts lack the required information, expense reports may be denied, which can be frustrating for employees. Poor management of expense receipts can lead to fraud, tax audits, or even threats to your bottom line.

IRS rules and recordkeeping

The IRS maintains guidelines for what constitutes a valid expense receipt. IRS-compliant receipts should include all the following information:

• Transaction date
• Expense amount
• Vendor information, including name, phone number, and email
• Description of the purchase
• Proof of payment

Paper and digital receipts are both acceptable, provided they're clear and accurate.

Because a tax audit can include returns filed within the past 3 years, you should hold onto expense receipts for at least that long. However, many experts recommend retaining receipts and other documentation for a minimum of 7 years.

Failing to follow IRS rules for receipts can leave you vulnerable to denied deductions, potential audits, or even stricter penalties and fines.

How to create and organize receipts

The key to creating and managing receipts is staying organized and consistent. When you’re getting started, it usually makes sense to do things manually; you have fewer receipts and expenses to keep track of. But as your business grows, consider digitizing and automating the process to save time and money.

Either way, if you’re not sure how to get started, follow these steps for creating and organizing receipts for expenses:

Step 1: Choose a receipt format

Traditionally, all receipts were paper. But those days are over. While plenty of businesses still use paper receipts, you need to decide if it makes more sense to go completely digital.

Step 2: Include required details

As you create your custom receipt templates, you'll want to include:

• The date of the transaction
• The name and location of the vendor
• A description of the item or service
• The amount paid
• Payment method
• Business purpose

To stay compliant with IRS standards, be sure to include all relevant information and verify that it’s accurate, readable, and accessible. To make sure your team is staying consistent, create an expense policy with expense report receipt standards and communicate it to your employees.

Step 3: Save or scan receipts

Keeping organized business receipts isn’t just helpful for compliance with the IRS; it also helps you manage your budget and finances properly. A proper filing system will do the trick at first, but as your company grows, you'll need to lean on software to help.

When you’re talking about a few dozen receipts a year, keeping them in marked folders or envelopes in a file cabinet may be fine. But as your company grows, you’ll likely suddenly find yourself with hundreds of receipts. That’s when scanning and storing in the cloud becomes necessary.

There are many receipt-scanning apps out there that can help. Often, you can scan receipts right from your smartphone and then send them instantly to your email or expense management software.

One thing to keep in mind when storing your receipts digitally is to maintain a consistent naming structure. An expense management platform will do this for you automatically. But if you’re not there yet, make sure to name them in a way that's useful to you so you can retrieve them as necessary.

Consider a format like this: YYYY/MM/DD_Vendor name_Expense.

What should be on a receipt?

No matter the format, for a proof of purchase to be valid and ready to submit for an expense report and reimbursement, it should show the following details:

• The date of the transaction
• The name of the vendor, supplier, or service provider, with contact information
• An itemized list and description of the items or services purchased
• The cost of each item or service
• The total amount
• The payment method you used for the transaction
• Business purpose, if applicable

You want to include as much supporting documentation as possible. For example, at a client dinner, try to obtain a fully itemized receipt that shows everyone’s meals. The credit card slip that only lists the full amount is likely not enough information to serve as a valid receipt.

Using expense management software

Bringing on an automated expense management tool will save you time and money in the long run. Here are a few ways that automation helps with receipt management:

• Automated scanning and data extraction: Receipt scanning automatically digitizes your receipts and can even track expenses automatically from there. With Ramp, receipt integrations can help avoid lost receipts and sync them immediately, so employees don't have to take that action.
• Cloud storage and easy access: Your paper trail doesn’t need to be literally made of paper. Digital receipts, such as e-receipts, are also valid. There are many ways to upload receipts and store them digitally in the cloud, which makes them easier to find when needed, especially for audits.
• Integration with other reporting tools: Look for expense management software that integrates with the other accounting, finance, or HR tools you’re already using for a seamless experience. When your platforms work together, you can automate expense processes from start to finish and gain real-time insights.

When deciding which tool is best, the first thing to consider is your business needs. Check ratings, read customer reviews, compare functionality, and understand integrations to find a tool with the feature set to help you achieve your financial goals.

Security and privacy tips

Receipts can often contain sensitive information, such as client details, financial data, credit card or bank account numbers, and transaction records. When that information isn’t secure, you can be vulnerable to cyberattacks, fraud, identity theft, or business losses.

That means security and privacy are especially important. Any platform you use to manage receipts should be equipped with encryption, password protection, and secure cloud service functionality to ensure all your receipts are safe and can’t be accessed by unauthorized users.

Some of Ramp’s key security features include multi-factor authentication, data encryption in transit and at rest, and robust fraud prevention measures. Role-based access lets you determine who has permission to review sensitive financial data.

How Ramp can help automate receipt compliance

Tracking down receipts and ensuring they meet compliance requirements can feel like a never-ending game of cat and mouse. Finance teams waste hours chasing employees for missing documentation, manually reviewing receipts for IRS requirements, and scrambling during audits to prove expenses were legitimate. Meanwhile, employees struggle with keeping track of paper receipts, remembering to submit them on time, and understanding what information needs to be captured for compliance.

Ramp transforms this painful process with our modern expense management automation software. The platform's receipt matching technology automatically captures and attaches receipts to transactions, eliminating the manual hunt for documentation.

When employees make purchases with their Ramp cards, the system prompts them to upload receipts directly through the mobile app, using OCR technology to extract key details like merchant name, date, amount, and itemized information. This ensures every receipt contains the IRS-required elements for tax compliance, including transactions over $75 that need detailed documentation.

For expenses that don't originate from Ramp cards, the reimbursement workflow enforces receipt requirements before approval. Employees can't submit reimbursement requests without proper documentation, and the system flags any receipts missing critical compliance information. Finance teams can set custom rules requiring receipts for specific expense categories or amounts, ensuring nothing slips through the cracks.

The real game-changer is Ramp's automated expense categorization and coding. Instead of manually reviewing each receipt to determine the appropriate GL code or tax category, Ramp uses machine learning to automatically categorize expenses based on merchant data and past coding patterns.

This not only saves hours of manual work but also ensures consistent categorization for audit purposes. With all receipts digitized, searchable, and linked directly to transactions, you're always audit-ready without the stress of last-minute documentation scrambles.

Say goodbye to paper receipts

With Ramp, the days of chasing down lost receipts, bugging employees to submit their documents, and sifting through years of paper receipts are over. More than 40,000 businesses have saved 27.5 million hours by automating busywork with Ramp. What could your team do with that kind of time savings?

Try an interactive demo to learn more.