Handling paper receipts and contractors that do not provide paid invoices?

Question

Hey all, looking for a sanity check from people actually doing this.

My brother and I have a few flips going in DFW and we keep getting in the same fight about how we track expenses. Wanted to see if anyone else deals with this stuff or if we're just bad at it.

Two specific things driving us crazy:

The receipt problem. Multiple Lowe's/HD/Sherwin Williams runs in a day, receipts end up in the truck, on a dashboard, in a pocket. By Sunday half are faded and nobody remembers if those 2x4s were for the Smith house or the one on Maple. My brother sits down every Sunday night with a stack of receipts and a bank statement and types everything into a spreadsheet so our bookkeeper can reconcile it. He says that's just how it is. I think it's insane.

The invoice problem. This one I think is worse. Plumber finishes the rough-in, asks for $1,800 on Zelle on a Friday. Says he'll email the invoice. Never does. Drywaller does the same. AC guy does the same. We've got cash going out the door with no paper trail and our bookkeeper is constantly nagging us for documentation come tax time.

So two questions:

• How do you actually log receipts in the field? Are you making whoever's at the store text you a photo? Using an app? Or are you in the same Sunday-night-with-a-shoebox boat as us?
• The cash/Zelle sub thing — how the hell do you handle this? Do you make them sign something? Generate your own invoice on their behalf? Just eat it and tell your CPA "trust me"?

Not looking for software recommendations necessarily, just want to know if other operators have actually solved this or if we just need to suck it up and accept that this part of the business is messy.

Appreciate any wisdom.

Jake Baker · Answer

@Greg Rubertone

We use QuickBooks Online to manage our rehabs and track everything financially. It can feel complicated, but once you get in a rhythm and set expectations with your contractors, it is great. For stores like Home Depot, you can assign a PO number to the property. If you have a contractor who is a purchaser under your account, they must assign the property and provide you with the receipt. If they do not, they do not get paid. Make that clear to them. QuickBooks also has a receipt capture feature on the app. It's not the best, but it does the job.

If you're flipping multiple properties at a time and you have enough cash flow to support it, I would consider hiring a bookkeeper that focuses on house flippers. They can help you build good systems and free up a lot of your time and stress.

Richard Golding · Answer

Greg I have been in those Sunday night spreadsheet sessions with a partner and I can tell you it is the fastest way to burn out. You are not running a construction company at that point you are running a high stress data entry firm.

You do not actually need six separate physical cards for your six flips. That is a logistical nightmare. The move is to leverage the Pro Xtra or Lowe’s MVP accounts and link them to your primary business card. Those pro desks allow you to assign a Job Name or PO right at the register.

Even better look into using a platform like Ramp. The person at the store gets a text the second they swipe the card. They just reply to that text with the property name and a photo of the receipt and it is logged before they even get back to the truck. It completely removes the human error of the dashboard graveyard.

For the subs you have to be the blunt guy for exactly one week. If they can find the Zelle button they can find the Send button on an invoice. Tell them your bookkeeper or your lender has locked the outgoing draws until a PDF is uploaded. It sounds like a lie but it creates a third party villain so you do not have to be the jerk.

The reality is that if you pay them before the paperwork you are training them to be messy. They have zero incentive to do the boring stuff once the cash is in their account. Make the invoice the actual trigger for the payment. If they text you saying I am done you text back saying Great send the invoice and I will hit send on the Zelle. They will figure it out real fast when their weekend money is on the line.

I caught a sixty thousand dollar mistake on a renovation bid recently just by being obsessive about these line items. If you do not have the paper trail you can never do a forensic review to see where you are actually losing money on your DFW flips. Tighten the process now or you will never be able to scale past those six houses.

Are you and your brother using any kind of shared drive for these photos right now or is it all just living on separate phones?

Cliff Benner · Answer

Good questions.

I use QBO for all my clients, FYI as you read this.

In QBO you can hook up your Home Depot Pro account and it brings in that same information for you to code it that way. I also have all my clients on BOX, with the phone app they can scan the receipt right away so then you got it.

I get this for contractors, but you need a paper trail, so if they want the money, then make them send an invoice. Id send an invoice for $1800. You can always have a written piece of paper that you write what they did, the date, completed, the property, and then make them initial and sign it right there as your proof too(not as clean but it does make them sign something saying the agree they did it, completed it, and billed for it all in one). I have some of my clients on BILL, where they say their accountant(me) is the one to pay it and they have to submit their invoice into the system in order for accountant(me) to pay it(they pay it but blame me and finds that it works).

It's messy but a system you have to create in your business to be compliant and make sure that you CYA too. It sounds bad but it will only take one IRS letter questioning you before you don't care if they say they will send it, either they do or they don't get paid at all.

Craig Janet · Answer

Could always go old school. Break out the check book and only pay subs with a check with a description in memo. It will hold up in an audit, civil case, or any other dispute. Then review your bank statement weekly.

Jason Malabute · Answer

Cleaning this up is doable without a major overhaul. On the receipt side, getting everything into QuickBooks Online and linking your Home Depot Pro account is usually the fastest fix because the receipt detail imports automatically and you can code it to the right property without retyping anything. For other stores, snap a photo right away with the QBO mobile app or a tool like BOX so receipts get captured before they ever make it to the truck dashboard. For the sub problem, the cleanest move is to refuse payment until they send an invoice. If they still won't send one, write up a one page document with the date, scope, property, and amount, and have them sign and initial it before the money goes out. Some firms also run payments through a system like BILL where the bookkeeper is the gatekeeper on outgoing payments, which trains subs to send their paperwork pretty quickly once they realize that is how they get paid. The specifics of what holds up in an audit can depend on your facts, so I'd run your final process by your own CPA so you know it is defensible.

Cliff Benner · Answer

As long as their signature is on it, and you have a correct W9, then yes. If something were to come up with the IRS, you would be able to show that you had a legit expense from a Vendor and sent a 1099 to them that included that amount, if applicable. Then they would be able to contact that vendor to discuss that charge.

This shows that you are documenting all your Business's transactions with a paper trail and reporting properly, if your vendor doesn't report it properly it is not on you. It also proves that you AND the Vendor have acknowledged the contract but also removes you from liability. Like if they were to claim you never paid them because they send a "second" invoice. They could claim that the first payment was for nothing else and there is no paper trail that the two parties agreed that the first payment was for a specific item/service.

CYA, the IRS will make YOU furnish proof for YOUR business transactions and might not care about your Vendor or even go to them and make them furnish proof. It could be that it was for supplies, and they could say "we think it's for service, you have no paper proof it isn't, now you need to file a 1099 to them with late fees and penalties" then go to the Vendor and say, "you didn't report this income now we need penalties and interest from you too".

Aaron Zimmerman · Answer

@Greg Rubertone I'm actually not 100% sure. I do tax not bookkeeping.@Cliff Benner and@Jake Baker would be better suited to answer if they have any clients that use.

my initial thoughts would be to put in notes of the property or perhaps there's a setup that allows you to track by property

Handling paper receipts and contractors that do not provide paid invoices?

Handling paper receipts and contractors that do not provide paid invoices?

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