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As a business grows, it’s faced with the burden of keeping track of stacks of paper and e-receipts. If your business is still doing your receipt management manually, just know that there’s an alternative: automation.
Automated accounting systems can enhance efficiency and save you those precious hours spent on manual data entry, not to mention significantly reduce the risk of human error. This, in turn, can eliminate financial discrepancies down the line.
In this article, we’ll detail five steps for keeping track of and organizing purchase receipts for business purposes. These include:
- Choosing the right receipt capturing tool
- Setting up a filing system
- Implementing automation to manage receipt data
- Integrating receipt automation with accounting software
- Monitoring your receipt tracking systems
With that, let’s get into the details of how to keep track of receipts in a small business.
How to organize your business receipts in 5 steps
Step 1: Choose the right tool for capturing receipts
There are a host of electronic receipt-capturing tools on the market, and navigating through them can be a dizzying process. We recommend taking into account the following factors when considering your options:
- Compatibility with your present accounting software
- User-friendliness
- Optical character recognition accuracy
- Pricing Reputation
With that said, here are some automation tools to consider:
Receipt scanning and tracking apps
A receipt scanning app is a tool that helps you organize and manage your receipts. It allows you to digitally store and categorize receipts for expenses, making it easier to track and retrieve them. Examples of such apps include Quickbooks Online, Zoho Expense, Expensify, Wave, Neat, and Shoeboxed.
Expense management software
This type of software is used to automate expense reporting, submission, and approval of business expenses. They also allow you to easily capture receipts, categorize business expenses, and generate reports. Some of the leading expense management software platforms are Ramp, SAP Concur, Zoho Expense, Coupa, and Navan.
Notes apps
Tools like Evernote or Google Docs can be used for managing receipts by capturing and organizing them into notes, including details such as date and amount. Additionally, tags, notebooks, and text notes can be used for categorization and adding context. Although these options are easy to start with, they may become challenging to manage over time, requiring considerable manual effort.
Step 2: Set up a filing system
Once you've zeroed in on the receipt capturing tool you plan to use, the next step is to set up a filing system.
The aim here is to maintain an organized and efficient record-keeping process, so you can easily access and retrieve important receipts when you need them.
The following are some good rules of thumb when it comes to filing:
- Make sure to categorize receipts based on expense types. Some common categories are utilities, office supplies, and travel.
- Use consistent naming conventions, including dates and brief descriptions, for easy identification.
Create folders corresponding to business expense categories, and organize them by year or month for efficient retrieval.
Step 3: Implement automation to manage receipt data
Implementing automation to manage your receipts involves both capturing your receipt data and extracting it.
Receipt capture automation
Receipt capture automation involves using technology, such as optical character recognition (OCR) software, to extract and digitize information from paper or digital receipts.
With the help of this technology you can easily capture details like date, amount, and vendor from receipts. By automating this process, these apps can help you eliminate the potential for manual error.
Data extraction automation
Data extraction automation involves using software tools to automatically gather information from various sources, such as websites, databases, or documents, and organize it in a usable format. To extract data, you can:
- Implement Optical Character Recognition (OCR) technology to extract text data from scanned receipts, making it easier to process and analyze. One tool to do that is Tesseract, a free software that can recognize text in images and convert it into machine-readable text.
- Integrate software solutions that specialize in extracting key data fields from receipts, ensuring accurate and reliable extraction for further automation processes.
Step 4: Integrate receipt automation with accounting software
After you’ve implemented receipt tracking automation, the next step is to integrate it with your company’s accounting software. This step is crucial for maintaining accurate and up-to-date financial records.
Here are three reasons syncing up your receipt automation with your accounting software is important:
- It streamlines the transfer of data. Integrating automation processes with accounting software facilitates seamless data transfer between your different systems. This reduces both the resources drain and the possibility for data entry error associated with doing it manually.
- It ensures accuracy in your bookkeeping. Automation helps enhance accuracy by minimizing manual bookkeeping errors. It ensures that financial records are consistently and precisely updated, contributing to reliable bookkeeping.
Step 5: Monitor and assess your receipt tracking systems
Once you've successfully integrated your automation processes with your accounting software, you'll need to regularly assess the system's performance. You should make sure that it aligns with business requirements, and identify any potential issues.
We recommend analyzing metrics like processing times, accuracy, scalability, and error rates to assess your automated receipts system's performance. Additionally, we suggest seek user feedback or, if you're the user, identify and address areas for improvement.
It’s also important to periodically compare financial records in the software with bank statements. If there are any discrepancies, you’ll want to get to the bottom of those and resolve them immediately. This will help you maintain the integrity of your financial data.
Printed vs. electronic receipts
At this point some of you may wonder if printed receipts work for tax purposes or if the IRS is accommodating enough to accept pictures of receipts. After all, what’s the point of automating if you still have to hold on to your wad of old receipts?
Well, the answer is, yes, the IRS accepts electronic receipts as long as they are readable and have all the information that it needs.
But don’t throw away those old paper receipts just yet! You should keep them for a minimum period of three years as a backup, in case of an audit. This also applies to LLCs.
How Ramp can help you automate your receipt tracking
Ramp offers innovative solutions for managing receipts, allowing you to automatically track business expenses and categorize charges as they come in, and generate reports on them instantly. Plus you can record them on the spot with Ramp’s mobile receipt capture feature.
These tools are just one part of Ramp’s powerful expense management software. This technology offers ways to automate your entire expense management process, from travel expenses to budgeting.
The centerpiece is Ramp’s corporate card, which comes backed by spend limits, reconciliation tools, and an intuitive platform for paying invoices and managing reimbursements.
Loved reading the content? Read more small business management tips from Gary on Ledger Lab's blog.
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