How to track your small business expenses

How to track your small business expenses

How to track your small business expenses

Tracking your business expenses may seem tedious, but it is a key part of being effective Money management. Small business expense tracking Not only can you better understand the overall financial situation of your business, but it can also help you prepare Tax season.

If you’re not sure where to start, here’s how to learn more about the importance of tracking expenses——and How to do it correctly.

Why track business expenses?

Understanding your business expenses is the first step in improving profitability.When you know where your funds go each month, you can make more informed decisions about spending and Development is more effective Grow Strategy.

Small business expense tracking Contribute to the following areas:

    • cash flow: Monitoring your expenses helps you stay healthy cash flow And create more accurate cash flow forecasts.
    • Leaked funds: When you regularly check your expenses, you can more easily identify areas where you may lose money.
  • income: You will be able to create stronger revenue forecasts, which can help you set more realistic sales goals.
  • Taxes: Careful recording of expenditures throughout the year can make it easier to minimize taxes.
  • Return on investment: Tracking your expenses—and measuring the results of those costs—is a great way to determine the return on investment for each cost.
  • Budget: Tracking your expenses is the key to creating and sustaining your business monthly, quarterly and yearly Budget.

What business expenses should you track?

Business expenses refer to any costs related to operating a business.This includes operating expenses such as software and Marketing, And expenses related to goods and production, such as materials or storage.

READ MORE:  Does your business need to declare bankruptcy?

For tax reduction purposes, U.S. Internal Revenue Service defines business expenses As a “common and necessary” cost. This means that any business expenses you want to deduct should be a normal and essential part of maintaining operations.

The costs you track will vary slightly depending on your industry and business model, but in general, it’s best to pay close attention to the following:

  • rent
  • Public utilities
  • Office Information Technology
  • Office Supplies
  • insurance
  • professional service
  • Material
  • Store
  • labor
  • Marketing and advertising
  • Software hosting
  • Service subscription
  • Employee wages and benefits
  • business travel
  • Commercial vehicles and mileage
  • Office meal

How to manage Small business expense tracking

Tracking your business expenses doesn’t have to be complicated. All you need is a good system. However, before choosing, please prepare for success through the following steps:

Separate your commercial banking business from your personal banking business.

If you have not separated your personal and corporate financial accounts, now is the time to do so.Specified Commercial bank account And commercial credit cards can more easily classify and calculate your various business costs.

Learn how to digitize receipts.

In order to save the time and pressure of the tax season, it is wise to develop the habit of digitizing and organizing all business receipts. When you pay for business expenses—whether it’s gasoline for delivery vehicles or updated inventory management software—take a few minutes to save and file your receipts.

For paper receipts, try using a receipt scanning application to upload a digital copy to the cloud. For receipts received via email, you can take a screenshot or save a PDF copy of the receipt. From there, make sure to tag your receipts and file them in easy-to-find folders on the cloud-based drive.

Create categories for your expenses.

learn How to classify expenses for small businesses Cost is of the utmost importance. When you categorize expenditures, you can more easily view expenditure patterns, identify unnecessary costs, and figure out how to adjust cash flow.

READ MORE:  PPP loans are back! This is the latest news.

First list your various Fixed and variable operating expenses, And then write down two notes to describe each note. As you move down the list, you will start to see the emergence of natural categories. Here are just a few examples:

  • office: Electricity, water, telephone, office supplies and office equipment
  • Marketing and advertising: Software subscription, direct mail, website hosting
  • Cost of goods sold: Materials, inventory storage, packaging, labor

3 ways to track business expenses

You can use several methods to classify and record business expenses:

1. Create and update spreadsheets

If you are proficient in Excel or if you don’t have a lot of business expenses, you may need to use a spreadsheet to record your expenses.You can create your own tracking table or use one of Excel Small business expense tracking template. You may want to include columns that specify the following: business expense type, payment amount, supplier or company paid, date, cost purpose, and any relevant notes or details.

Remember, while tracking expenses through a spreadsheet is an affordable and easily accessible option, it’s not necessarily the safest or most accurate method. It is easy to make mistakes when entering information manually; in addition, if your spreadsheet is not automatically updated to the cloud, you may lose important business information when your computer crashes.

2. Hire an accountant

If you want to take a more non-intrusive approach to expense tracking, please consider hiring Business accountant As a full-time staff member or consultant on call. You still need to provide your accountant with copies of information, invoices, and receipts, but the people you hire can take over the daily classification and tracking, and then generate monthly or quarterly reports for you to review.

3. Investment expense tracking or accounting software

Use accounting software, Budget appOr tracking system is one of the easiest ways to ensure accurate expense tracking. Most software platforms integrate with your business bank account and automatically classify and update your fees, so you don’t have to spend time entering information.

READ MORE:  Oracle Eloqua Evaluation

Not only that, but there are many Budget planner And the accounting system also generates weekly, monthly or quarterly Expense report, So you can view real-time data about expenditures at any time.

To determine which software system is best for your business, consider your budget, expense tracking needs, and short- and long-term business goals. There are countless expense tracking options, but here are some of the best options for small businesses:

  • Quick book: Fast book It is an all-in-one business accounting platform that can handle payroll, expense tracking and online payments. You can connect all bank and payment accounts to the platform, scan business receipts directly into the app, and view your expenses in one place.
  • Mint: Mint This is a good choice for freelancers or sole proprietors who want a simple and direct way to track their expenses. You can set a budget in the app, create categories for your spending, and monitor your spending on the dashboard.
  • Fresh books: new book Connect to your bank account or credit card to automatically classify and update your fees. The platform also allows you to take receipts and mark certain expenses as billable to make it easier to issue invoices.
  • spend: Expensed It is a tracking application especially suitable for business travel. You can scan receipts, track mileage and connect to your accounting system or commercial credit card.

Check your expenses monthly

Even if you use one Expense tracking app Or accounting software, it is still important to check your expenses monthly for errors and insights. A closer look at your expenses is a great way to understand your cash flow, make more accurate sales forecasts, and stay within your budget.

Fundbox and its affiliates do not provide tax, legal or accounting advice. This material is for reference only and is not intended to be provided and should not be used as a basis for tax, legal or accounting advice. Before conducting any transaction, you should consult your tax, legal and accounting advisors.

News related