Why bookkeepers need receipts

Accurately recording all the details provides evidence of spending related to your business. Keeping the originals or scanned copies is essential. Without them you can miss opportunities to claim allowable expenses that reduce your tax bill. If your business is registered for VAT you could also pay more to HM Revenue and Customs (HMRC) than you need to. 

 

A ‘receipt’ is a record of money you have spent including paper and electronic records. Keeping up to date with recording and storing your receipt details is important for: 

 

HMRC can ask to see your records for up to six years. Keeping the information well organised will save you a lot of time and money if you have an inspection. 

 

There aren’t specific legal requirements about how to manage your receipts but you need evidence of spending for tax purposes. You’ll need it for your Self-Assessment tax return if you’re a sole trader. If you own a limited company you’ll need records for Corporation Tax. Anti-money laundering laws also require records of transactions. 

 

Receipts come in different formats from a till receipt to a .pdf file or electronic transfer record. However, they should all include some key information about the transaction: 

 

Paper documents require a signature or other authorisation. Digital receipts need a valid electronic signature. Without authorisation the receipt can’t be used for your tax returns. 

 

Normally, a purchase invoice confirms what needs to be paid and the due date. A receipt confirms you have paid for a product or service. You might have both for a single transaction which is why it’s important to record them accurately. They might apply to external purchases or internal transactions. 

 

External receipts might include: 

 

Internal receipts might include: 

 

Understanding where records come from helps to keep track of your spending. For example, many of us use online banking but even if we print our digital statements they’re still external records. It’s also important to identify replacement documents, if an invoice goes missing, for example. You’ll need to highlight duplicate documents and it’s best to avoid them for large amounts all together, if possible. Even small sums used for ‘petty’ cash must have a proper record. 

 

Your bookkeeper will collect, record and file your receipts in a reliable and accurate way. They will follow important rules to keep your records up to date, without any gaps. They also check or ‘reconcile’ spending against your bank account to make sure nothing is missed. This is important to make sure all your costs are clearly assigned and records are easily found. 

 

Many bookkeeping processes are now digital, so the format can vary, depending on the software used. At LEOBS, we recommend Xero accounting software in the cloud so you can see your records wherever you are. 

 

HMRC requires specific information about tax deductible expenses. For example, for small sums you need your supplier’s address, invoice number and amount. More details are often required for larger expenses. These might include the invoice due date, a description of the products and services and VAT registration number. If a receipt only names an item, number and price, you should ideally also add details of the purchased items and their purpose. The more precise, the better. 

 

For expenses that could be for personal use such as transport and hospitality you’ll need information about the destination and purpose. If you don’t have receipts for tickets, parking or fares, for example, you should provide an expenses form.