What Is an Expense Receipt? Why Is It So Important?

What Is An Expense Receipt?

An expense receipt is a kind of document that represents proof of the payment done for the purchase of goods or services associated with business expenses. It includes the following details:

• Date of receipt
• Customer details
• Business details
• Description of the purchase
• Cost of items
• Total paid amount

This expense receipt is useful for employees to avail of the expense refund they make on behalf of their company.

For instance, suppose an employee purchases stationery products like pens, sticky notes, and file folders. In this case, the employee must ask for an expense receipt from the vendor to get repaid by the company by showing the expense receipt as a proof.

Why Does Expense Receipt Matter a Lot?

There is no doubt that expense report receipts are valuable for a business. These receipts for business expenses are helpful for companies to claim tax deductions on expenses. It is because these receipts show valid proof of purchase.

For the employees, these receipts are useful for reimbursed expenses made by them on behalf of the company. Therefore, it is useful for employees to claim every amount they spend on the business.

What Qualifies as a Valid Proof of Purchase?

There are numerous proofs of purchase that vendors and clients can utilize for legal or other purposes. However, it depends on the type of business and the company’s expense policies. Some of the valid purchasing proofs are as follows –

• Invoice
• Receipt
• Bank statement
• Guarantee & warranty certificates
• Delivery notes
• Purchase orders
• Packing slips
• Contract or agreement of purchase

The most common type of proof is a receipt and an invoice. Most business professionals consider these two proofs as a priority.

Importance of Expense Receipts

After knowing the meaning of expense receipts, now we move further to explore their importance. Here’s why expense receipts are important for businesses.

Accurate Book Keeping

Expense receipts are useful documents for businesses to maintain accurate bookkeeping. It contains all the necessary details that simplify expense tracking.

Reimbursement

Expense receipts are useful to claim for business expenses made by employees.

Financial Audits

Businesses need expense reports for internal and external audits.

Fraud Prevention

Receipts for expenses are also useful for fraud prevention. This is because it presents proof of expenses and includes the actual cost of expenditure.

Financial Planning

It is easy to track expenses through expense receipts. One can have a clear landscape of money expenses.

Tax Compliance

Expense receipts are also useful as evidence of deductions on tax returns. It represents the details in a prescribed format.

What Are the Different Types of Expenditures Which Requires Proof of Payment?

There are certain expenses where strong payment evidence is needed. The following are the expenditures –

Transport Cost

Proof of expenditure is required when a person makes an expenditure on transportation during an official tour. The proof can be either in the form of a digital invoice, digital receipt, or physical receipt.

Meal Expenses

It’s easy to grab proper proof of meal expenses because many restaurants offer the proper receipt. These receipts cover the right information like date, time, and purchasing amount. This provides valid proof of purchase receipt.

Mileage Tracking

Tracking the mileage is crucial when an employee uses his own vehicle for office purposes. Here employees need to show how much mileage has been spent to claim the expenditure. The most suitable method for mileage tracking is the use of mileage logs.

Accommodation Expenses

Accommodation expenses refer to the expenses made during the employees staying outside the town during the official tour. Employees of the company need to submit the receipt of accommodation expenses to claim the expense made by the employee’s pocket.

Other Expenses

Other miscellaneous expenses related to official work like office supplies, setting up conferences, and events also need proper receipts. Employees can avail of the expense with a professional receipt.

Automate Expense Receipt Tracking With Moon Invoice

Moon Invoice is the right solution for you to automate expense receipt making and tracking. This preferred accounting software offers pre-defined fields that are helpful to generate an e-receipt in less than a minute.

You can fill in the following details –

• The customer’s name and address
• Sales receipt #, currency, and date
• Line item details with quantity, rate, tax, and discount
• Terms & conditions
• Attachment option for the supporting document (if any)

Once you generate a digital receipt, it’s easy to send it via WhatsApp or email. You can duplicate it as a sales receipt, check activity logs, and adjust PDF settings. You can import and upload the file in CSV, XLSX, XLS, and TSV. Sorting the receipt according to the date and customer name is also possible.

What Are Some Tips for Organizing Expense Receipts?

1. Using High-Performing Receipt Software

There is plenty of receipt generation software available. These platforms make receipt generation simple, accurate, and fast. However, when it comes to high-performing and reputed software, then Moon Invoice is the best one.

2. Mention the Correct Details

It is necessary to include accurate details on the expense receipt. Any wrong information can lead to a bad impact on the further process.

3. Expense Category

Mentioning the category of expense is not necessary but is a good practice to follow. It makes it easy to track an expense receipt. It means professionals get an idea of for which expenditure the report has been generated.

4. Review Regularly

Keep reviewing expense receipts at regular intervals. This helps remove all unnecessary and outdated expense reports receipts.

5. Back-Up Digital Files

Taking a backup of the digital files is a good approach. Professionals can easily save the files on cloud storage. This helps to retrieve back the file if lost accidentally or due to an issue in the system. Make sure financial records are safe and easily accessible.

6. Remove Unnecessary Receipts

When you review receipts, then remove all the unnecessary receipts that are no longer in use. This keeps your records clean and makes it easy to access the necessary and relevant information.

7. Record Every Key Detail

While generating receipts, write down every required detail with clarity. This helps in making the receipt super professional and also eliminates the chances of confusion.

What Is the Result of NonCompliance?

During IRS auditing, businesses need to showcase certain documents to prove the company’s expense, income, and deduction claims.

When a business provides valid proof of expense, it’s easy for the IRS to proceed with the further process. They check the accuracy of the claim and ensure that no shortcomings exist in the documents. In case they find any discrepancies, they might impose penalties.

Therefore, business owners must keep receipts and other documents well organized.

Receipts for the IRS: The case in the United States

The Internal Revenue Service (IRS) does not need a physical receipt for expenses under $75. It is known as the $75 receipt rule. So you are safe if your transaction is under $75 and you do not carry a physical receipt. However, still, you must have another supporting document for proof. This can be a bank statement showing the deduction while spending on the purchase.

For lodging expenses, the IRS needs a physical receipt regardless of the amount. So when it’s about lodging expenses (meals or traveling), you must keep a physical receipt with you for the smooth auditing process.

Last Words

Expense receipts are crucial evidence of the expense. It’s equally important for the business during tax purposes and for employees to claim expenses. Moreover, it’s also more crucial to generate an accurate receipt. So, never think about just a receipt.

Want to simplify your receipt and business expense management? Try Moon Invoice today!

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