Given that over 70% of the self-employed in the UK handle taxes on their own, it’s essential to get the hang of the routine. One of the most common tasks you have to deal with is collecting expense-related documents and posting them into your accounting records. Here’s a rough guide on how to post expense receipts and invoices into QuickBooks Online.
Company expenses reduce your tax bill
Collecting expense-related documents is one of the most typical tasks for small business owners, including both sole traders and limited companies. All expense details must be recorded in your accounting records so that the tax period and the amounts are correct.
These documents are, in most cases, receipts and invoices, and sometimes credit card statements, vouchers, travel itineraries, etc.
You need to collect expense documents diligently
Bear in mind that businesses can only claim allowable expenses, those incurred exclusively in relation to running your business. There are plenty of valid expenses you can deduct, such as office accessories, rent, mobile phones, PCs, computer accessories, advertising, education, travel, or your employees’ salaries.
Here you can find the full list of the most common small business costs.
What types of expenses are available in QuickBooks
One of the facts that every amateur accountant must know is that cloud-based accounting solutions can do all tax calculations and generate tax records.
All you have to do is to input the right data related to how much you earn and how much you spend. To see all your company purchases, go to the Expenses tab available directly from QuickBooks Online’s dashboard. Here you can view all entries related to what your company purchased. To help you with managing expenses, QuickBooks offers a handy list of suppliers with all their details, which makes adding new purchases quicker.
To add a new expense, click the green button labelled “New Transaction” and then choose the right type of purchase:
Bills relate to all purchases that haven’t been paid for. An example would be a recurring bill from an ISP. Learn about the main differences between bills and expenses in QuickBooks.
You can add expenses when the transaction is already paid for with a credit card, bank transfer or cash. These purchases are typically documented with a receipt. Here are the main differences between an invoice and a receipt.
Note that if you made the payment based on a pro forma invoice, you still need a receipt to make sure that the proof of purchase is sufficient.
This option applies to expenses paid with a cheque.
- Purchase Order
If your company policy includes issuing Purchase Orders (PO), you can generate them with QuickBooks too. A PO is a document listing all details of purchase before it happens. After completing the transaction, you should receive a corresponding invoice or a receipt.
- Supplier Credit
If you receive money from your supplier for undelivered goods or services, you may enter this amount as a supplier credit available in QuickBooks Online.
Complete the form to enter expense receipts and invoices
When you choose the type of expense in QuickBooks, you need to fill in a form that adds business costs into your tax records. You will need to know the following details:
- The supplier
- Document number
- The total amount and the amount of VAT (if applicable)
- Payment method — for expenses (Card, Cash, Cheque, Direct Debit)
- Date and due date — for bills
- Expense Account (see below)
You can also add an attachment which is typically a scanned version of your invoice or receipt. Businesses don’t need to store paper copies of expense-related documents, so scanned files stored as QuickBooks attachments are perfectly okay.
Note that you can get access to different types of purchases by using handy QuickBooks Online keyboard shortcuts, for example CTRL + ALT + x is a shortcut for a new expense.
What are expense accounts and how to create one
You can categorise company expenses using expense accounts created in QuickBooks. Expense accounts illustrate the categories of goods and services purchased for company needs. To set up your expense accounts, follow these steps:
- Choose the Accounting tab from the vertical menu
- Click “New”
- Choose “Expense” from the Category Type drop-down menu
- Fill in the form and click Save
It will then be possible to select the newly created expense account when posting new expenses. Expense accounts help you categorise business costs so that you better understand what your company spends its money on.
You can speed up how you enter receipts and invoices into QuickBooks
As you can see from the process outlined, many business owners and bookkeepers rely on copying and pasting data when adding new bills and expenses. Posting invoices and receipts is especially time-consuming for businesses that receive a lot of expense-related documents, like online stores, with many different suppliers or companies who must deal with a lot of expense reports from their employees.
You can speed up the process by extracting data from your receipts and invoices using a combination of OCR and machine learning that helps you categorise expenses.