A friend of mine just reached out and posed the following question, and it felt like a perfect subject for a blog post!
Is tracking my receipts and purchases a big help financially? I have never been very great at this because I have this perception that it's not that important. Can you give me some direction here as I research?
It is extremely important! First, without properly tracking your income and expenses, you will have no idea how profitable your business truly is - and there's no point in scaling up a nonprofitable business. Second, receipts are important come tax time - without receipts you will not be able to properly substantiate any business expenses/"write-offs" if, God forbid, you are ever called into an audit.
You do not need to keep paper receipts (though I still encourage keeping them in a shoebox "just in case") because properly maintained digital receipts have become acceptable substantiation for the IRS in recent years.
Some folks may give you the guidance that you do not need to keep receipts under a certain threshold, say $75, but I figure why tempt fate - just keep them all!
All of my monthly bookkeeping clients receive access to a receipt tracking tool, where they can upload all of their receipts and they are kept digitally and securely in the cloud as an extra layer of protection. For an additional fee, we will also "manage" those receipts for you, digitally coding and filing them with links in your QuickBooks Online file.
Receipt tracking may be one of the easiest things that business owners can do to help keep their books "audit-resistant" - but it's often one that is overlooked as being "too tedious".