Be a master of your receipts

Scanning receipts can help you to keep your records in order by transferring all of that irritating paper to a structured, electronic record. That way, receipts won’t come back to haunt you later.

Being able to recall easily when a receipt was issued and find accompanying notes about what it was for will help you to reduce the anxieties associated with a tax audit.

If, on the other hand, you submit expenses to an employer, scanning receipts can make the production of an expense report easy, grease the wheels for the accounting department and enable you to get paid more quickly.

One of the biggest decisions to make in setting up a receipt-management system is whether you store your receipts locally or “in the cloud.”

Local or cloud storage

You might feel more comfortable having a locally stored copy of your receipts, especially considering that the Canada Revenue Agency (CRA) puts the onus on small businesses to produce documentary evidence during an audit.

Neat Receipts, from Philadelphia-based The Neat Co. (www.neat.com), is a lightweight hardware scanner designed to fit into a briefcase. This scanner plugs into a USB port on your computer and scans three or four receipts per second into locally installed hardware.

Neat also offers a service called Neat Cloud, which will back up your receipts and other documents to an online service. This gives you the peace of mind of having both local storage and an online backup.

The cloud service uses a mixture of software algorithms and human workers to analyse and categorize receipts, entering pertinent information (such as receipt amount and business name) into the relevant fields in your software. That process makes generating an expense report even easier.

Other online services offer the chance to do away with scanning altogether. Shoeboxed (www.shoeboxed.com), from Durham, N.C.-based Shoeboxed Inc., provides users with an envelope, complete with prepaid shipping, into which you can drop all of your paper receipts. You drop the envelope in the mail; Shoeboxed scans the content upon receiving the envelope.

Like Neat Cloud, this service automatically categorizes your receipts, turning badly printed or scrawled records into legible, computerized text that is fully searchable.

Weighing risks

The key is whether you want to entrust your receipts to the mail, as well as how much of a risk you want to take with the CRA. On the face of it, ditching your paper documents in lieu of electronic ones is acceptable – but with caveats.

The CRA outlines its requirements for record-keeping in a document entitled “Keeping Records.” This document does allow for an imaging program to produce readable reproductions of original paper supporting documents.

Having said that, you must follow procedures laid out in other guidelines, particularly one from the Canadian General Standards Board (part of Public Works Canada), which requires that you be able to prove that the images were not tampered with and that you provide a time stamp for when your electronic documents were produced.

To be completely safe, you would have to keep a folder to store all original paper receipts, while relying on a dependable receipt-management service for structure and accounting. That way, if an auditor ever strikes, you’ll be ready with the backup documents to avoid any potential liability.

Using your phone

You don’t have to send your paper in the mail to Shoeboxed. Both Shoeboxed and Neat provide a separate mobile phone app so you can input receipts by taking pictures of them. This is part of a growing trend that puts your smartphone at the centre of your records-management regime.

These apps turn your smartphone into a scanner. Snap an image with your phone, press a button and your receipt automatically is submitted to the cloud-based service.

Several companies offer this feature, including San Francisco-based Expensify (www.expensify.com), which also categorizes your receipts, which seems to be a standard feature for these types of apps.

Expensify’s mobile app includes several features, depending upon the contract level you choose.

The free version allows you to scan 10 receipts per month, and also imports expenses from your credit card or bank statements.

The US$5 per month version permits unlimited receipt uploads from your smartphone, and this version of the app will produce expense reports for you. This version also gives you basic workflow approval, so that a manager responsible for your expenses could sign off on them, for example.

Other options offering a broadly similar service include London, U.K.-based Receipt Bank (www.receipt-bank.com), which starts at US$13 per month, and Sydney, Australia-based DocketBank (www.docketbank.com), which starts at A$9.99 per month.

One of the most important considerations when choosing one of these apps is how it will link into the other aspects of your accounting. For independent advisors, it may be useful to connect your online receipt-management system with an accounting program.

Several online accounting systems offer to pull information from multiple sources, making data entry and bookkeeping far easier.

New Zealand-based service Xero (www.xero.com) pulls information from several of these online services, such as Receipt Bank and Expensify. Like many online accounting systems, Xero also pulls information from bank accounts and online credit card statements, enabling you to reconcile expenses against your online bank entries and produce detailed reports for your accountant should you be running your own business.

Keep a journal

Keeping a daily business journal that details meetings is not a bad idea, either, because the more proof you can provide to an auditor that a business expense is legitimate, the better. If you book your appointments in an electronic calendar, that’s a great start.

Receipt management needn’t be a headache. If you don’t have an electronic system yet, you might have to endure a little inconvenience in transferring your paper into an electronic format; but, once that’s complete, a scanning app enables you to pull receipts directly into your system at the point of purchase.

Anything that reduces the amount of time that you (or your assistant) spend on expense management has to be a good thing.

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