You might think that tracking your business expenses is another hard-to-do task. But with the right tools and techniques, it should be a lot less painful. With the help of these tools, you can track your business expenses like a pro.
But why is it essential to track your expenses? As a business owner, you need to keep a close watch on how much you spend, big or small. And the best way to do that is by tracking your company’s daily expenses.
Besides, tracking business expenses is critical to making tax computation a lot easier. Many of your expenses can be considered as write-offs. By tracking your expenses regularly, you can spot potential deductions right away. As a result, you’ll pay lesser tax, or better yet, get more back.
How to track your business expenses? Here’s how:
Open a Separate Bank Account for Business
Regardless of the size of your business, it’s crucial to have separate financial accounts for it. By doing so, it will be easier to track how much money you earn and spend. Many new entrepreneurs commit the mistake of using their personal bank accounts for their business. This practice will only make you confused as your personal and business transactions are mixed up.
Open a separate bank account for your business so that all expenses related to your business are transparent. And also, make sure to use your business account for company purchases. A finance tracker can make the job easier for you. However, online banking can also help you track where your money goes.
Here are the accounts you need to open for your business:
- Savings account
- Checking account
- Business credit card
Organize your Receipts Accordingly
Keeping your receipts and organizing them is vital if you want to ensure proper tracking of your expenses. When you purchase something, keep the receipt and store it properly. There are two different types of receipts these days, paper and digital. Here are some tips for proper storage:
- Always have an envelope for receipts in your bag.
- When you get to the office, put the receipts in one folder. Make sure to put a label at the back of the receipt indicating the purpose of the purchase.
- File your receipts every month and put them in a cabinet according to their category.
For digital receipts, download a mobile app that can help you manage them. If you aren’t using one yet, here are some recommendations:
- Receipt Bank
- Kodak Alaris
It would also be wiser to digitize paper receipts to ensure easy access. Besides, it’s safer to store them this way to lessen paper storage in the office, allowing you to have more space for other documents.
Create a Spreadsheet
Using a spreadsheet to track your expenses seem traditional, but it’s a reliable approach, especially if you’re just new in the industry. Of course, as your company expands, your expenses will significantly grow as well. When that happens, it would be wiser to use software that automatically does the job for you.
Making a spreadsheet means that you must manually track every centavo you receive and spend for the business. It sounds like a lot of work, but small businesses can manage with this method.
Unlike automatic trackers, you have to categorize your expenses and sort them manually. This should be easy to do with Google Sheets or Excel, yet you can always opt to use where you’re comfortable to work with.
Innovation is vital to the success of your company. If you want to stay updated with your expenses, you need to start considering the use of cloud accounting software. It is expected that more than 90% of small businesses will utilize this software in the following years, so don’t let yourself be left behind.
Having access to finances and books is essential for many entrepreneurs these days. Business owners who cannot always make it into the office are very particular in having software that they can depend on no matter where in the world they might be. Through accounting software, you can get valuable information through your mobile device.
Moreover, cloud accounting software also links to your business bank account and credit card. This feature allows business owners to stay updated with their company’s daily expenses in real-time. And this is also the reason why it’s much better to utilize digital transactions instead of using cash. By using software, you can devote your time to other vital tasks in the office.
Review Your Records
Tracking your expenses is not just about knowing how much you spend; it’s also about why you spent the money. It’s especially important to review your records if you have employees that have access to your financial accounts.
By doing so, you ensure that your money is spent on business-related matters only. It also reduces the risk of employees taking advantage of their position.
Tracking your company’s expenses is a crucial step in attaining financial data required not just for better daily or monthly management but enhanced long-term decision-making that will help your company grow.