Understanding the Receipt and Its Importance
Every business has many different types of records that they will need to deal with when it comes to the financial accounting for their company. One of the groups of documents will be the receipts.
🤷♂️What is a Receipt?
A receipt is a permanent record of a transaction concerning something of value that has been transferred from one party or company to another. Some common types of receipts related to business are:
Business to business transactions
Business to customer transactions
Stock market transactions
📃 The Importance of Receipts
Companies must be able to account for the money that is involved in the business. That includes money that is going out, as well as money that is coming in. The receipts are the hard form of proof that backs up these financial transactions.
💵 Sales Receipts
Most businesses generate their business income through the provision of selling products or services. The clients who receive these need a receipt to prove that they have received, and paid for, the transaction. They also can rely on the receipt if they need to take back a product based on the Company’s return policy.
The business needs these receipts for several reasons:
To keep their accounts receivables in order. The receipts can act as a hard copy for the accounting department to determine that a product or service has been paid for
The receipts can be used to honor warranties
Receipts are necessary for tax purposes. It shows the Internal Revenue Service (IRS) the money trail when it comes to finances that have come into the company
There can be different types of receipts, such as those that are created with the use of a receipt book, or those generated by a cash register. Also, credit card receipts are part of this category.
Businesses also have to purchase items, and the receipts for these will help to track the money spent by the company.
When Should You Give Receipts?
A receipt, also known as proof of purchase, is a document that records and proves that a person has received money or property as payment after a sale or transfer of goods and services. A receipt can be a handwritten document, printed from a cash register, or in some cases, in the form of an invoice. Different businesses and jurisdictions have varying policies that govern the exchange or return of goods without a receipt indicating that a purchase was made. Here are some guidelines on when to issue, or not issue, a receipt, and what its contents should be.
As a small business operator, ensure that you acknowledge payment for goods and services once a sale is finalized, especially when selling a product of medium or high value. Always issue a receipt if you anticipate a billing dispute. You may use notes instead of slips to prove that a transaction occurred. Be sure to have a template in place to fill in the necessary data quickly. Sale receipts allow you to track inventory and revenue.
When a Customer Doesn’t Have to Be Issued with a Receipt
Despite the improvements in technology and the introduction of online receipts, no law dictates that you must issue receipts after receiving payments for goods and services online. You also don’t have to issue receipts when you operate a vending machine or sell groceries in an outdoor market or if you sell lotteries and games. Remember, that you may issue receipts if you wish, for the activities as mentioned earlier, if you find it necessary.
Contents of a Receipt
As the owner of a small company, you may find yourself in a difficult situation when preparing receipts, especially if you don’t know what should appear in the documentation. A standard receipt should feature a business name, address and receipt number as well as the date of issue, the amount paid, and the type and quantity of product.
