The first receipts for taxes are believed to have originated in ancient Egypt. To avoid tax exploitation, merchants and farmers started documenting their transactions. Though we no longer use papyrus, electronic receipts originate from this practice.
Receipts acknowledge a transaction from one individual to another. Customers traditionally receive receipts from service providers or vendors. Though, they are also issued with stock market transactions and business-to-business transactions. The receipt shows that the transaction has taken place.
Aside from showing ownership, receipts are helpful in exchanges or returns. Many retailers will not accept returns or exchanges unless the receipt was issued within a certain timeframe. Receipts can be helpful when a product has a warranty because they show when the product was purchased by the customer.
In this guide, we'll explain why it's important to offer different receipt options, why it's important to keep track of receipts as a small business owner, and how to create digital receipts.
The Age of Digital Receipts
Every year, the U.S. consumes over 3 million trees and an astonishing 9 billion gallons of water. How do measly receipts influence this number? It costs over 4 billion pounds of carbon dioxide and 302 million pounds of solid waste to produce paper receipts.
Despite the environmental harm caused, receipts are paramount to record keeping. Playing a critical role in taxes and as proof or purchase for warranty or return, receipts are essential. The solution? Paperless receipts.
Apple first introduced the idea in 2005, and several retailers have adopted it since then. Best Buy, Target, Lowe's, Macy's. Publix, Nordstrom, GNC, CVS, Walmart, and CVS were all early adopters of paperless receipts.
The younger generation is known for their dislike of paper and clutter. The youth's dislike for clutter is expected to increase the momentum for paperless receipts. Companies that once printed impressively long receipts have moved to the digital age. Besides reduction in clutter, what other factors are influencing the switch to paperless receipts?
Since paper receipts are susceptible to damage and loss, many small business owners turn to digital receipts. Plus, paperless receipts like text or email receipts are often more convenient for customers. Although they are less susceptible to damage and loss, a hard drive failure can prove catastrophic. For this reason, making sure your digital receipts are stored in a place that is easily accessible is vital. To avoid the hassle and worry of a failed hard drive, consider storing your digital receipts somewhere online or on an external hard drive.
Bookkeeping With Receipts
According to the Internal Revenue Service (IRS), there are certain types of receipts that all small businesses should keep in a recordkeeping system. This is because you will need certain documents for your tax return and the IRS could audit your business. For this reason, the IRS recommends a record keeping system that includes a summary of your business transactions, gross income, dedications, and credits. Although a checking account can be enough for some businesses, an electronic accounting software can be helpful in organizing and capturing business records.
The IRS requires small business owners to keep the records listed above as either hard copy books or as electronic records. Additional documents to include are sales, payroll, purchases, transactions, and supporting documents such as paid bills, invoices, receipts, deposit slips, canceled checks, and sales slips.
Here is a list of records you should keep:
- Gross Receipts: These are the receipts you receive from your business. You should keep receipts that show the amounts and sources, such as cash register tapes, deposit information (cash and credit sales), receipt books, invoices, and Forms 1099-MISC.
- Expenses: This includes the costs you incur to keep your business running. Supporting documents should recognize the amount paid, payee, proof of payment, the date incurred, and a description of the item or service. Documents that you should keep for expenses include canceled checks, proof of any transfer of funds (i.e., receipts), invoices, account statements, and credit card receipts and statements.
- Purchases: Keep proof of purchase records for items you buy and resell to customers. Documents you should keep include cash register tape receipts, credit card receipts and statements, invoices, and canceled checks, and proof of any transfer of funds (i.e., receipts).
- Assets: Assets include machinery and furniture that you own to operate your business. Keep records of your business assets to compute your annual depreciation and the gain/loss if you sell the assets.
- Employment Taxes: As a small business owner, you will need to keep specific employment tax records for at least four years.
- Travel, Transportation, Entertainment, and Gift Expenses: If you deduct any of these expenses, you will need proof.
Since 1997, the IRS has accepted paperless receipts. In fact, electronic receipts are becoming the norm over paper receipts. According to the IRS Revenue Procedure 97-22, business owners must be able to provide a copy of receipts to the IRS when requested. This procedure also states that taxpayers must store digital receipts in a manner that keeps the receipts preserved as well as in a manner that allows them to be easily retrievable, reproduced, and accurate.
All documents for the IRS should provide details about the:
- Type of expenses
- Total amount
How to Create a Digital Receipt Using Skynova
Not only do receipts serve as an essential tax document, but they also act as a proof of purchase for your client. Professionalism is an essential step in winning customer loyalty for any small business owner. Issuing professional receipts is a fantastic way to make a great impression on customers.
Here's how simple it is to create a receipt using our receipt template:
- Use our free template that can be saved digitally or printed.
- Start by adding your information to the receipt. It is important to include accurate information regarding your business for tax purposes and so your customer knows who the receipt is from. Simply type in your name then add your phone number and address in the "Your address" box.
- Add the customer information. Just like your information, make sure the customer information is accurate. This can help avoid any potential confusion in the future. Simply type in the customer's name and add their phone number (if applicable), email address, and physical address.
- Include a unique receipt number into the "Receipt #" box, which is above the date.
- Make sure the date of the receipt is the day which the receipt will be issued.
- Include an itemized list in the receipt. To do so, click on the drop-down below "Item." Depending on your business, what you provide, and how you bill customers, select Service, Hours, Days, Product, or Expense from the Item drop-down.
- Add a description to each item on the receipt. This helps avoid confusion and explains the charges for each item on the list.
- Add the Unit Price and Quantity. The "unit price" shows the amount you charge per product or service, while the "quantity" represents the number of products purchased or service.
- Include any discounts by selecting "Discount" in the Item drop-down. Include a description, the unit price, and amount of discount in the total.
- Write a note. Including a note can help cover questions the customer may have about the receipt, or it can provide a great place to write a personalized note to the customer.
Here's an example of how it works:
First, you would include information regarding your business name and contact information, and the contact information of the customer. Then, make sure the receipt number is unique, and the date is the date in which the receipt will be issued.
Let's say you have a cleaning business and charge an hourly rate. Having worked four hours cleaning a home, you would select "Hours" from the Item drop-down list and include a description that you cleaned the living room, bathrooms, and two bedrooms. Since you charge an hourly rate, the unit price would be the amount you charge per hour, which in this case is $30 per hour. In the quantity box, you would add 4. The "Amount" will automatically populate as $120 after you add "30" to the unit price and "4" into the quantity.
Lastly, you could include any discounts you might offer. Then, add a personalized note.
Simplify the Checkout Process With Skynova
As a small business owner, cutting back on time-consuming tasks is essential in running your business smoothly. Sending receipts with Skynova is simple, allowing you to send professional receipts in seconds. Streamline your business processes with Skynova's accounting software, which helps organize your important business records.
Notice to the Reader
The content within this article is a general guide to creating digital receipts and may not apply to your specific situation. Always consult with a professional accountant to ensure you're meeting accounting standards.