Imagine this: You’ve lost your phone. Or maybe, it was your keys. Could’ve been your chapstick. Doesn’t matter.
Anyway, you lost something you need, and you’re scrambling frantically for it. You dig in the bottom of your purse, you raid the junk drawer in you kitchen (yes, we know you have a junk drawer), and you check both the glove compartment and the center console in your car.
You know what you probably did find? Wads of receipts. Which only makes you more frustrated. They feel like hoarded trash. And in this moment of desperation, you want desperately to to shred them to pieces.
In the name of all that is holy, don’t toss those receipts! Tax season is approaching. You will definitely need them. If you missed any spots where you usually hide your receipts, go get them. As you move them from one messy pile from another, filter out your non-business receipts. Then make sure you have the following supplies:
Label each of your folders with the expense name and the quarter. For example: “Product materials - Apr-Jun”. (See our post on which expenses to track for your business.) Go to your computer, and make the same virtual folders on your computer for your digital receipts.
Pair one highlighter color with each quarter: blue for Jan-Mar, green for Apr-Jun, yellow for Jul-Sept, and pink for Oct-Dec. Go through your receipts, and mark each one with a line at the top according to the date.
Separate the receipts in each quarter out by expense categories, and put in the corresponding folders. Finally, go through each folder and put your receipts in chronological order. Group the ones from each month together and paperclip them together.
Whew! Now that that’s done for this year, it’s time to start prepping for next year. First, always, always, always remember… If you are purchasing something at all related to your business, ALWAYS say yes when you’re asked, “Would you like a receipt?” If you’re paper-conscious, you can request digital receipts when available.
Next, go to all the places where you found your stuffed receipts, and add an envelope. It’s helpful to have a place to put them that will keep them clean and flat. We recommend envelopes in your car and in your secret junk drawer, at the very least.
For your virtual folders, it’s important to create new ones for each year. Otherwise, you’ll end up with another big mess! Since these folders don’t use any resources, we recommend labeling them by each month instead of by quarter. Label each digital receipt with the date and the item. For example: “2/17 - January utility bill”.
Overall, the most important thing you can do is stay consistent. Once a month, sort all of your receipts according to the method described above. Make sure you don’t forget about your digital receipts! If you keep up with this as you go along, next December will be much less stressful than this year’s.
Check out the expense and income tracker that I use to track all of my business finances https://kdbehindthebooks.com/expense-tracker-training