Organizing your receipts is important when working with a bookkeeper, accountant, or tax preparer. And, of course, when Canada Revenue Agency (CRA) comes calling wanting to look at your receipts. For the former, having your receipts organized makes entering the information go much smoother, and could result in a cost saving on their fees. For CRA, your ability to find a receipt easily and fast ensures that your audit goes without a hitch, and CRA is happy you provided the information in a very timely manner. As someone once said, ‘Do you want the four hour audit, or the four day one?’ How you organize your receipts determines that.
The best way to organize your receipts for bookkeeping is by month, based on your fiscal year. The reason is that when we’re entering your receipts we reconcile by the month, therefore, having everything by the month makes it easy to ensure we have everything. Now once everything is entered how you file those receipts depends on the size of your business.
For most sole proprietorships, filing by category (as per the Statement of Business Activities on your personal tax return) will work just fine. That is by office, meals, travel, telephone/internet (or communications), advertising/marketing, etc. CRA when they do a review or audit will look at the lines on the Statement of Business Activities and want to look at the receipts that pertain to that line item. Bank statements, as well as credit card statements, would be filed together so they are quickly accessible.
If you’re a larger sole proprietorship, or corporation, then you are probably better off filing your receipts based on the purchaser rather than the expense category. If you get your telephone/internet from Telus then have a file for Telus, or Shaw or Rogers. Have a file for each major vendor with which you do business. I do find it helpful to have a file for Meals and Automobile as these two categories get looked at the most; rather than having them under a vendor category.
For bank and credit card statements you can attach the smaller receipts to the statement, so they don’t get lost. Go by the statement dates for attaching receipts not just the month.
Also keep files for each leases, contracts, etc. so you can find them when they come up for renewal, or just to know when they are coming up for renewal.
You should have a separate file for each employee. This file can contain their employment contract, TD1s, signing up for benefits plans, contact information (including emergency contact information), time sheets, paystubs, T4s, annual or other reviews, disciplinary actions taken (and letters written about such to the employee), etc. Document everything you do with an employee so that you are covered if you have to let them go, or they quit, and some kind of action needs to be taken or has been taken.
For your personal taxes, you can keep all your slips together along with a copy of your return. I’d keep each year in it’s own envelope (we have our ‘Tax Stuff’ envelopes) or folder, and attach all donations, medical expenses, etc. together, along with your T-slips (T3, T4, T5, etc.). For the sole proprietor, I’d keep a copy of your income statement and balance sheet for that year in this file too.
For corporations, I’d have a file that keeps all your year-end documents together: the corporate tax return, the year-end financial statements, along with the adjusting entries and the adjusted year-end trial balance. Don’t forget to enter your year-end adjusting entries so your data file matches what was filed with CRA.
Hopefully you never have CRA come calling. However, you will find that as long as you keep everything organized anytime CRA comes calling you won’t be in a panic about finding items as they are at your fingertips. With an organized filing system, you can find things quickly when you need them.