The more you know, the more power you have to manage your business successfully. Some of this is instinctive. An owner usually knows their busy season, which accounts are slow payers and when customers will change to a different product line.
But no business owner can keep all of these data in their head. The thing is that understanding the current state of your business makes it possible to make the best possible decisions. If you’re making decisions without data, you risk making errors or missing growth opportunities.
The data are on your receipts.
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What to look for
Because they’re important, you’ll want to organize your receipts, harvest their data and store them safely. Then create a system for leveraging your receipt data.
Once you’ve done that, the data from your receipts are the DNA for the tools you need to provide a fast, firm look at the state of your business. Among these are:
Where to get what you need
To generate these helpful reports, you’ll need data. Receipts provide your documentation. Make sure you’re capturing:
- Travel and expense report receipts. You can calculate whether salespeople are spending more than a job will pay.
- Inventory purchase receipts. Capturing these will let you analyze whether you’re buying too much or too frequently. You can also see whether you’re overdependent on a single vendor.
- Supply purchase receipts. These are part of overhead and can denote overspending.
- Repair receipts. These also are part of overhead. Increasing frequency can indicate when an asset — computer, forklift, facility roof — is going bad. This means you can plan for a replacement.
- Postage and shipping receipts. Beyond tax deductibility, you can gauge whether work deadlines are being cut close. Returns can provide insight into product problems.
- Asset purchases. Your credit card receipts or bills of sale will contain the information and can be tracked when properly recorded.
You may want to record others depending on your business model.
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What to do with the data
The true value of this information is using it to get a sense of the business and make decisions going forward. Formalizing the process with a periodic State of Business Assessment. In a small operation, this may just be a session with yourself. A larger business might include key employees. Your receipts let you compare the present to the past. You may watch year over year, quarter to quarter or month to month. Receipt data gives you the power.
Some decisions you can make based on your receipt data include:
- Advertising. If you add up your receipts and sales are down, you may want to spend money on suitable advertising. You may want to bump spending when sales are up, too.
- Hiring or downsizing. If there’s too much inventory, it may make sense to add temporary help to move the merchandise. Booming sales receipts might mean it’s time to add hands. Declining sales may mean staff reductions.
- New products or services. Increased sales in a specific region may provide a reason to create a product targeting that region.
- Financing. Reduced sales receipts could affect cash flow and prompt a request for financing. Big sales with money to come later might also inspire you to borrow to tide you until the cash comes in.
- New office or production space. Sales or inventory receipts might mean you need more space. Maybe it’s time to move from the garage to a small office or move production from a ghost kitchen to your own.
- Vendor assessment. Dates on your receipts will identify unreliable vendors or whether you rely too much on a single vendor.
Storage and access
To generate the most intelligence from your receipts, you need access to them or the information on them. Keep the physical receipts in one place. That may be a box, a drawer or a file cabinet. The downside to this is that they’re out of sight. You might forget where they are, or you might be keeping them in disorder. And working with the physical receipts is just plain a pain.
Transferring the data to a journal or a spreadsheet makes access easier. A spreadsheet also gives you the opportunity to perform some functions and examine different scenarios quickly. As the complexity of what you do grows, you may prefer a document management system. These capture the data on your receipts through optical character recognition (OCR) and scanning, uploading from your desktop computer or emails. The data are then sorted, organized and stored in the cloud securely.
Related: How to Write an Income Statement for Your Business Plan
Receive and you shall ask
Receipts are the basis for almost all the accounting information you need to manage your business. Just remember: The IRS likes your receipts, too. Get them, record them and store them and their data safely and logically. The system you use will keep you from getting lost in the details — you won’t want to pull out thousands, hundreds or even dozens of sales receipts for the month if you know their sum.
