As a new year barrels along, the tax season looms on many business owners’ minds - especially those who are self-employed. While making the most of the previous year’s earnings and deductions is important to people running their own businesses, the team at Receipt Bank noticed one big drawback: those in the self-employed arena often lost documentation that could result in valuable deductions.
Receipt Bank, founded to “revolutionize accounting,” helps self-employed workers file their taxes seamlessly. Their app, 1Tap, uses character recognition software and images to eliminate data entry and avoid lost receipts. The company is now expanding its technology to the U.S., where the self-employed population is growing exponentially. The 1Tap app works in tandem with accounting and bookkeeping professionals and was created to automate data collection and leverage accounting knowledge for analysis, not data entry.
With backing from Insight Venture Partners and Kennet Partners, Receipt Bank has celebrated six years of year-over-year growth of 100 percent or more. Used by Big Four accounting firms and the self-employed alike.
We dig into the revolutionizing a headache-inducing process and follow the magic of automation.
Receipt Bank was founded because the historically small businesses provided documents and receipts to their accountants in a manual and time-intensive way. Often, an accountant would drive to a client’s office, or a box of documents was sent via postal mail. Most importantly, accountants don't like to chase their clients to send their documents, and small business owners don’t like the hassle of having to provide documents for compliance and tax reasons — it provides very little value to small business owners who are trying to run their businesses.
1Tap was created for a very similar reason: to make it easier to be self-employed. Keeping track of business expenses all year long is not easy. People use multiple credit and bank cards, and receipts get lost. When transactions are lost, they can't be deducted. So 1Tap Receipts is an easy way to take pictures of business expenses all year long and save more money on taxes. For tax professionals, they know self-employed clients rarely complete their tax organizers, and they often charge self-employed clients 50 percent more for their taxes because it takes so much time to help collect, itemize, and categorize all of their clients’ annual expenses.
The fact that accountants bill more for the service doesn't mean they enjoy it more or that it’s a good use of their time during a busy tax season. The IRS reported in 2015 that there were more than 25 million tax returns for self-employed professionals that contained 1.4 billion expense transactions. The number of self-employed workers is growing, so we know there’s a lot of manual data entry and time tracking of receipts to be saved. Both of these areas are classic win-wins for accountants and business owners.
Receipt Bank is unique in that it uses character recognition software to eliminate data entry. Receipt Bank can't imagine that in three years, anyone will be doing data entry — not bookkeepers, not accountants, and not small business owners. And small business owners won’t want to pay anyone to do data entry for them, either. There’s still plenty of work for bookkeepers and accountants to do outside of this data entry to help their clients. By removing the data entry task, accountants and bookkeepers can be better advisors to small business clients because they will have more time to dedicate to advising.
The most common error that happens is that receipts or expenses are lost, meaning transactions cannot be deducted. A second issue is that the IRS requires all receipts over $75 to be retained in case of an audit; if someone gets audited and doesn’t have those receipts, then he or she can face significant interest and penalties from the IRS, in addition to losing the money saved on the deduction itself. 1Tap Receipts retains all the expenses in the cloud for 10 years, and they can be exported at any time to a PDF. Trying to get copies of receipts or transactions from two, three, or five years ago is a massive time sink and often not possible.
Finance and accounting apps continue to evolve. By making apps very simple and easy to use, we believe the adoption and usage of apps will dramatically increase. It’s so easy — there’s really no training needed. If people can take pictures of their families with their phones, they can take pictures of their receipts and business expenses. The rest of the process in eliminating data entry is magic — no more effort required. They hope to eliminate the data entry of more than 100 million documents in 2018 for our clients. By doing that, they hope to make accounting and bookkeeping a little bit better for everyone involved.