Receipt Reconciliation – Why it Matters for Tradies
As a tradie, it's easy to get caught up in the day-to-day grind of running your business, such as sending quotes, managing job sites, and procuring the right supplies. However, receipt reconciliation is one crucial aspect of running a successful business that is often overlooked. This blog post will outline why receipt reconciliation is essential for tradies and how it can benefit your business.
What is receipt reconciliation?
Receipt reconciliation is the process of matching receipts against bank transactions to ensure that all transactions are accurate and accounted for. It's a way of double-checking your financial records to ensure they are correct.
If your business is registered for GST, receipt reconciliation is especially important. This is because your receipt will capture the amount of GST you paid to a merchant or supplier. This GST can then be used to offset any GST you have earned from supplying your tradie services, and ultimately this forms part of your BAS and tax calculations.
"If your business is registered for GST, receipt reconciliation is especially important. This is because your receipt will capture the amount of GST you paid to a merchant or supplier"
Why is a receipt important to the ATO?
The ATO considers a receipt to be the accurate GST record as it provides evidence of a transaction and the amount of GST that was paid. Having a receipt is vital as businesses need to keep accurate records of all transactions to comply with GST laws.
Why is receipt reconciliation important for tradies?
1. Receipts help to avoid errors and fraud
Receipt reconciliation is an essential step in identifying errors and detecting fraudulent activity. By reconciling receipts against bank transactions, you can identify and investigate any discrepancies further. For example, if you notice a payment to a supplier you didn't make or a charge higher than the amount on the receipt, you can investigate the issue and resolve the matter.
2. Provides accurate financial information
Receipt reconciliation provides accurate financial information crucial for making informed business decisions. With detailed financial information, it's easier to track your business's financial performance, identify areas for improvement, and make informed decisions about future investments.
3. Helps to manage cash flow
Receipt reconciliation is an essential tool for managing cash flow. By reconciling receipts against bank transactions, you can identify differences between what you've received and invoiced. This will help you to identify any late payments which can impact your cash flow and take corrective action.
4. Keeping a digital copy
Reconciling receipts against bank transactions can help reduce accounting errors. By keeping a digital copy, you can avoid issues with lost receipts or receipts that have faded beyond recognition. Storing receipts against a bank transaction also makes them easy to search and access if ATO is conducting an audit of your business.
5. Improves tax compliance
Receipt reconciliation is a crucial step in ensuring compliance with tax laws. By reconciling your receipts against bank statements, you can ensure that you have accurate records of all your income and expenses, making filing your tax returns much easier and more accurate.
How to reconcile your receipts with Thriday?
Reconciling your receipts is a straightforward process with Thriday. To get started, you'll need to sign up for Thriday and then use the Thriday Visa Debit card to make purchases. As soon as you complete a purchase, the transaction will be displayed on the Thriday accounts screen, and you can upload, forward or take a photo of the receipt to reconcile it. Thriday then automatically does the hard work of matching each receipt to the corresponding transaction on your bank statement, checking that the amounts match and that the date and description of the transaction are correct.
Top tips for effective receipt reconciliation
Here are the best tips for reconciling receipts:
- Keep track of all your receipts: Make sure you keep them in a safe place and upload them to Thriday as soon as possible.
- Set up auto-forwarding rules: If receipts are sent to your mailbox, you can get them automatically forwarded to Thriday.
- Reconcile regularly: It's essential to reconcile your receipts regularly, as this will help you identify any issues early on.
- Seek professional advice: If you need help reconciling your receipts or have questions about tax compliance, seek advice from the friendly Thriday customer care team.
Receipt Reconciliation FAQs
What is receipt reconciliation?
Receipt reconciliation is the process of verifying that all receipts and expenses recorded in a business's accounting system match your bank account transactions.
Why is receipt reconciliation important for a business?
Receipt reconciliation helps to ensure that a business's financial records are accurate and up-to-date, which is crucial for making tax deduction claims because, without a receipt, your claim will be invalid.
How do you reconcile receipts?
To reconcile receipts, you need to compare the receipts collected with the expenses recorded in your accounting system. Any discrepancies should be investigated and resolved to ensure your financial records are accurate.
How often should you reconcile receipts?
It is recommended that businesses reconcile their receipts regularly, such as daily or weekly, to ensure that any discrepancies are caught and resolved promptly.
What are some best practices for receipt reconciliation?
Best practices for receipt reconciliation include keeping all receipts organised and filed, using dedicated accounting software like Thriday, reconciling receipts regularly, and conducting periodic audits of your financial records to ensure accuracy.
Receipt reconciliation is an essential process for tradies to get right. It helps ensure accuracy and compliance with ATO tax laws and provides valuable insights into your business. You can stay on top of your finances by implementing effective receipt reconciliation practices and build a successful and profitable tradie business.