It is fairly easy to keep track of expenses that you get invoiced for. For example if you have a regular supplier, you would probably have set them up in your bookkeeping system as a vendor and keep track of all the bills that come through, as well as all payments made to that vendor.
It becomes a bit tricky when it comes to the various purchases here or there, especially purchases made on credit/debit cards, or cash, and you have a sales receipt as your supporting documentation for the business expense. For example, if you use your car for business, you would want to keep all the receipts from every time you fuel up your car. Likewise, there are so many other small expenses like buying stamps, office supplies, business meals & entertainment, travel expenses,…etc…that all quickly add up and before you know it, you have a shoe-box of sales receipts and you are wondering where to start.
It does not make sense to spend time keying each single sales receipt as you would do with a bill or invoice. It would just make your bookkeeping cumbersome. For one, a lot of these are one-time small miscellaneous purchases, and I am sure you would not want to create a new vendor for every time you make a purchase. Secondly, it is just too time consuming, and trust me your time is better spent elsewhere.
Simple Solution – Expense Reports
The best way to handle the bookkeeping for these one-off or small credit/debit/cash purchases is through the use of expense reports. You can easily use an excel spreadsheet to add up the purchases, put them in a category by expense type (e.g office supplies, fuel expense, meals expense…etc), and then key just a single amount and the total GST/HST for the group into your bookkeeping system. If you want to keep track of how much you are spending at a particular place, you can group the receipts by vendor, and enter the total amount as a vendor expense. You should attach all the receipts to the expense report, and have an easy reference that you can tie back to what is in the system.
I always find it easy to use the month and/or payment method as reference and as the filing system for expense reports. I group all expenses made in a particular month, and then by payment type, and use that to post the single entry. For example, cash purchases made in Jan 2016 would have a description in my posting as “Expense report for cash purchases for Jan 2016”. The line by line entries will be the total under each expense category, and the GST/HST that needs to be recaptured. I highly recommend to scan all the receipts and save them in your cloud folder so that you can easily retrieve them if required. You have to remember that a lot of the thermal sales receipts fade very quickly, so will probably not last long enough for the 6 year retention period required by Canada Revenue Agency (CRA). Keeping a scanned copy is very effective in ensuring that your supporting documentation will be available when needed. There are some smart scanners on the market that are able to read sales receipts and automatically capture the detail on the receipts and create an expense report. This saves a lot of time, and also provides an electronic copy for your records. An example is the Neat mobile receipt scanner, which I personally use, and this has made the process for expense reports very quick and easy to maintain.
An example of an expense report: