Keep Those Receipts & Make Life Easier

Save Your Receipts, Bills, & Invoice Documents for Later

Why Busy Business Owners Should Keep Receipts

Why is Manny always saying…”I need those receipts”? Or asking you, “What expense category was this check for?” Or, another of my favorites, “Which of your clients made what payments listed on this single bank deposit?”

10 reason why you should keep your receipts

If you can’t back up the claims made in your company’s accounting record…the “Company Books”, you are exposing yourself to potential problems. You not only might be unaware of the complete company financial status, you also run the risk of being denied deductions if, shudder the thought, you get an IRS audit notice. And, having the receipts available for bookkeeping means a more accurate record, decreasing the risk of an audit.

Federal Recordkeeping Requirements

1. IRS Recordkeeping Rules:
   • The IRS requires businesses to keep records that support income, deductions, and credits shown on tax returns.
   • Retention Period: Typically 3 years, but up to 7 years in cases of loss from worthless securities or bad debt deductions.
2. Corporate Transparency Act (CTA): — As of March 2025, U.S. based exempted from filling, at least for now. Read more from the Fincen announcement here.
   • As of January 1, 2024, many small businesses must report Beneficial Ownership Information (BOI) to the Financial Crimes Enforcement Network (FinCEN).
   • Businesses formed before 2024 must file by January 1, 2025; new businesses must file within 30 days of formation.
3. Small Business Administration (SBA):
   • SBA grant recipients and loan applicants must maintain detailed financial records for auditing and compliance

Why Bank Statements Alone Are Not Enough

1. Lack of Transaction Detail
   Bank statements show who was paid and how much, but not what was purchased. For example, a $500 charge at “Office Depot” could be for office supplies—or a personal laptop. Only a receipt or invoice clarifies the nature of the expense.
2. IRS Audit Risk
   The IRS requires documentation that proves business expenses are ordinary and necessary under IRC Section 162. Bank statements do not meet this standard alone. Missing receipts can lead to denied deductions and penalties.
3. No Proof of Sales Tax Paid
   Receipts and invoices often show sales tax paid, which is essential for reconciling tax filings. Bank statements don’t include this level of detail.
4. Inadequate for Cash Transactions
   Bank statements don’t capture cash payments unless they’re deposited or withdrawn. Without receipts, these transactions are invisible in your records.
5. Not Audit-Proof
   During an audit, the IRS or state tax authorities will ask for original supporting documents. Bank statements alone are not considered audit-proof evidence.
6. No Legal Protection in Disputes
   If a vendor or client disputes a payment or delivery, a bank statement won’t show what was purchased, when, or under what terms. Invoices and receipts are your legal backup.
7. Inaccurate Cash Flow Picture
   Bank statements are a snapshot in time. They don’t reflect pending checks, scheduled payments, or unrecorded liabilities, which can distort your cash flow planning.
8. Missed Deductions
   Without receipts, you may forget to claim legitimate deductions—like meals, travel, or small purchases—leading to higher tax bills.
9. Ineligible for Grants or Loans
   Lenders and grant programs often require detailed financial documentation. Bank statements alone may not satisfy their requirements.
10. Non-Compliance with GAAP or IFRS
    If your business follows Generally Accepted Accounting Principles (GAAP) or International Financial Reporting Standards (IFRS), you must maintain source documents to support journal entries and financial statements

Remember that Supporting Documents is the Keyword here. Without these you run the risk of missing legitimate deductions or penalties for expenses not being allowed on your tax return.

The Easy Receipt Solution

“Accordion” Expandable File Folder with Dividers

Simply but a $15-$20 accordion style file folder from any office supply store. Fits in the roving truck office, under or behind  the seat, and goes a long way in helping you save those receipts.

So, this small purchase will go a long way at a few things. First, it will help keep Manny from pulling his hair out. Second, it will make you feel more in control of your business operations … Keeping a smooth running machine.

And most importantly, it will help you avoid the dreaded IRS audit or cover the bases if you ever are subject to one. So do the smart thing and devise one more business system to keep things purring like a kitten.

Don’t forget to ask us about the other helpful tips to help you manage your business with as much ease as possible.

Check out Part 1 of our article, What is The Statement Of Cash Flows here.