How to Properly Document Your Credit Card Business Expenses (Video)

If you use a credit card for business transactions, you’re probably recording it wrong.

Using a credit card for the bulk of your business purchases these days has become the norm. It’s really convenient, you only have to pay one bill at the end of the month, and you earn rewards and perks. Lots of businesses are using this and some for really high volumes. The problem, however, is that the recordkeeping is often not optimal.

Many clients wait until the statement comes at the end of the month. They look at the statement and separate all the expenses and then they post them in giant clumps. What they see in their general ledger is “office supplies $1,000 Amex”. That doesn’t really tell you a whole story. Did you buy one $1,000 thing or did you buy lots of small things? Which vendors are you using? How often are you purchasing these things? And you lose all that detail when you post the credit card and only say which credit card company you were paying.

It is far better to record each individual transaction. In fact, the accounting software usually has features exactly for this purpose. You put in each purchase that you buy, you put in the name of the vendor, you can make memos, it helps you keep track of things, you have a better history, and you have a more complete set of records. Furthermore, many businesses save the monthly statement, but if you get audited, they want to see the individual sales receipts. They want to see every invoice and slip behind them because saying that you went to Staples does not prove that that was a legitimate deductible business expense. Far better to have the receipt that shows you bought toner and three pieces of paper.

Video: How to Properly Document Your Credit Card Business Expenses

Learn more:

• Year-End Bookkeeping Checklist