Why Keeping Receipts Are Important For A Business?
An organization or company is more likely to prosper with a brief knowledge of its financial stability and position. For the identification of economic stability, they must have enough records and shreds of evidence.
Transaction receipts are one of the ways to keep an eye on the progress of your business. You can easily identify the number of sales your company could make on certain products/ items in a certain month. These transactional receipts provide a base for developing other financial records such as income statements etc. Some businesses ignore the importance of keeping a record of receipts, which shouldn’t be the case.
Keep reading this piece of writing to get familiar with the importance of keeping a record of transactional receipts for a business or a company.
Top 6 reasons why you must keep a record of receipts
Records are one of the greatest assets for a business or organization. There may be various ways to collect the account details, such as the amount generated through sales, business expenditures, etc. A transaction receipt is an essential part of business record-keeping methods; they provide plenty of account details.
The following paragraphs will explain why a business dealing with day-to-day sales must keep its receipts.
1. Prepare financial records/ statements
Financial records such as profit and loss records are very important for a business to keep. To prepare such financial documents or income statements, a company must know their earnings or revenue and business expense. What is their liquid amount or capital? Transaction receipts are a great source for identifying an organization’s income and expenditure; hire the best accounting firms in Dubai to prepare your financial/ accounts records from these receipts for future needs.
2. Source of income
One of the important things that every business must know about is its source of income. A receipt is one of the easiest and reliable ways to identify the source of income for a business. The transactional receipts contain the person’s name paying the amount and the person’s name collecting the amount. When you have all these details in hand, conducting the business’s audit and tax activities becomes easier.
3. Identify the number of sales
Receipts contain the details of the sales and the products purchased by a customer. A business can use this information on the transaction receipts to identify which products have higher sales rates than other products or goods. When a company gets this information, it can improve its sales strategies for different products and increase other sales over time.
4. Customer details
Customer details are an asset for a business or organization; they can get their customer details from the previous transactional receipts. They may contain these receipts in digital form. Digital receipts are becoming very popular as they are very easy to keep and record for longer periods. These customer details also help you deal with item returns and exchanges from the customer side. You can identify whether the product/ item is exchangeable or not.
5. Tax refunds
People filing for tax refunds and claims always need to provide extra or detailed information. Keeping a record of transaction receipts will help you defend your tax return claims. Some people usually fail to assert their expenditures and income, due to which they could not get tax refunds. It is always good to keep your transactional details to increase the chances of getting tax refunds through evidence.
6. Calculate gross profit
The upcoming sales/ business strategies depend on the profit or loss ratios. To calculate gross profit through transactional receipts, deduct the good/ product manufacturing amount from the amount receivables through sales. The amount you will get will be your profit amount. You will need an expert to calculate the profit loss amounts for your business because miscalculations in these amounts lead to mismanagement and business failure. Hire experts from the best accounting firms in Dubai to prepare profit loss documents based on your transactions.
What things to include on a receipt?
A business may have a digital receipt generating system, or they manually make transactional receipts. Both the methods are commonly in use and are a must for every business to keep them as their accounts record. In the manual receipt system, the seller holds a copy of the receipt and gives one to the buyer. They can easily deal with the product exchanges and returns later without any possible conflicts.
Following are some of the elements that are a must to include in the receipt.
- Company name
- Company address
- Date of transaction
- Buyer/ customer details
- Receipt number
- Amount paid
- Amount received
- List of goods/ products purchased
- Payment methods
Keeping your transaction details will help you in the audit process
Every detail matters, and it becomes essential for businesses to record their financial transactions, expenses, and income to playoff the audit activities and processes with ease. When a company does not have previous financial records and receipts, it becomes difficult for the auditors and the accountants to proceed with the organization’s economic analysis and audit. That is why it is always recommendable to keep your records safe and easily accessible.