I took someone out for a cuppa recently and snapped a picture of the receipt for my records.
They asked what I was doing. I explained my business accounts are on Xero so naturally I snap pictures of my receipts to save time. This chap has been using Xero for many many years but had never taken a picture of a receipt.
I asked him how he does his expenses and he said he never had. I was blown away!
Now quickly to cover off entertaining expenses. Yes. You are right entertaining is not a tax allowable expense. That is not the same thing as you should never include the cost in your accounts.
If we accept that extracting money as a higher rate taxpayer costs about 1/3 in higher rate tax, and you’re going to entertain people anyway, who should buy the cuppas?
Well, my company buys mine which is why I snapped a copy of the receipt. When the money leaves my bank Xero already has a copy of the receipt and it takes me literally two seconds to match the two together. Records done but also tax saved! Why?
Well if I spend £100 on cuppas and use the company money it costs me nothing personally and the company £100 (as it does not get tax relief).
If I use my own money and never claim it back it costs the company £150 to pay me enough dividends to get the £100 I used to buy the cuppas. So by using my own money and not the company money I lost £50!
The distinction here is the company is allowed to pay for entertaining even if it does not get tax relief.
The separate and mind blowing post here was the chap has Xero but has never put a copy of a receipt in to his records ever! For me the time saving of accounts packages is two fold. Bank feed AND receipt capture. If you aren’t doing both you are definitely spending more time on your records than you need to be.