Trading has been evolving ever since the Early Men decided that they would exchange useful items and called it a barter system. We may have come a long, long way from the barter system, but the basics of business are still the same. If you are giving away more than you are getting back, you’re probably incurring immense losses and your business is on the brink of going bankrupt. No, we’re not scaring you. These are just facts.
A modern business owner in today’s world has a lot on his plate already- maintaining sales, customer satisfaction, bringing innovation, boosting productivity amongst employees, etc. Amongst all these job roles, a job as significant as business expense tracking gets lost. You cannot afford to overlook this vital component of your business, at any cost. You need to pay extra attention to what goes into this and what outcomes you are having. Only a businessman who has successfully tracked his business expenses can dream of making it big and making sure that their business stands out from the rest of the clan.
Small businesses have a harder way around doing this job in the early years. They need to be very cautious with all the expenses that they are doing and keep an alert check on all their money pathways because the revenue generation may not be as high as one aspires to during the early stages of their business. They need proper financial advice regarding crucial matters and a helping hand to track expenses for small businesses. In this blog, we are going to talk about what exactly business expense tracking means, how it is important for your small business, and also suggest some excellent ways by which you’ll be able to achieve this for your own company.
What is Business Expense Tracking?
As mentioned early on, business expense tracking is the continuous and diligent tracking of every business expense that is undertaken by your company, no matter how small or large. This plays an important role in creating a working and expense budget for your business. This involves taking note and maintaining a record of client receipts, the delivery invoices sent, and also the outgoing expenses incurred by your business.
This helps in making certain that your small business has commendable financial growth and health. It prevents you from investing too much in risky operations and understanding the market value of your business.
This will help to make your bookkeeping more accurate and adaptable. You can make forecasts with the help of this and explore several different trends that you observe in your number sheet. You might feel that this is a boring job and doesn’t require much of your attention.
But, in reality, you’ll find out that your business is actually not doing as great as you thought it was doing. This can serve as a reality check and also help you realize a lot of the weak and strong points of your small business. Working for a small business can be equally overwhelming and you might need some tips to manage your small business finances as well.
Why is tracking expenses for small businesses so important?
Manage your money better
To ensure success, your business must be able to stay at the top of its game for a continuous time period. Any break-outs in the middle can have an impactful effect on your business scale.
With business expense tracking, you can better manage your money and keep a look-out at what avenues your money is going to. You will stay financially aware throughout the working year and this itself will be very beneficial for your company. Maintain a good livelihood for your business by ensuring enough cash flow into your company accounts.
Be prepared for the tax season
When you have a solid record of all the expenses that you have made throughout the year, you wouldn’t be searching and looking through your bed mattresses and tablecloths for due receipts, when the dreaded tax season arrives. This will act as a safety net to prohibit you from spending extra money than what you are supposed to be keeping a check on all the tax-deductible expenses. These expenses include telephone bills, internet bills, bank fees, travel-related expenses, home office-related expenses, etc. Know and be aware of all financial issues faced by your small business. Expense tracking will make sure that the tax season does not come as a big blow to your small business.
Be able to give money back to your employees
With business expense tracking, you will be able to keep your employees happy. How so? By giving them timely reimbursements. You can take them out to team dinners, plan a worthy vacation once a year for your employees and make sure that they know you are thinking and taking measures for their recreation and happiness. When your employees are happy with the services that you are providing them, they will stay loyal to your company and work their level best to make sure that the business runs smoothly. Tracking expenses for your small business will easily help you achieve this.
Business expense tracking makes business forecasting easier
Calculating the profitability of your business becomes way easier when you track the expenses properly. All you then need to do is subtract the expenses from the total revenue generation of the month or year. This will help you to convince potential investors better and will help you to prove to them that your business is financially stable. It is an organized way of displaying the workings of your business and the business transactions that are taking place. Stay up-to-date with all the expenses that are taking place in your business and you will be successful in offering your clientele and stakeholders your business strategies, ideas, and goals.
How can business expense tracking be done by small businesses?
Below listed are a few easy, cost-effective, and highly useful ways by which expense tracking can be done by small businesses. Read on if you are still confused about how you can properly track all your business expenses and make note of all the suggestions. This can be a good place for you to begin your work.
Step 1: A business account must be established
Small businesses start in a one-room apartment- True. Small businesses are personal and may have only a handful of workers- True. Small businesses do not need a separate bank account because they are small- False.
This idea will cause your business immense havoc. You need to have a separate bank account for your business the moment you embark on this journey, irrespective of where you start it from and with how many people.
Your personal bank account should always have bank statements and expenses that have taken place owing to your expenditures that have nothing to do with your company. Putting your company’s expenses in the same account will only make you face trouble trying to separate between the two; it will make the lines blurry between the two unrelated expenses.
All your business expenses should be done from this same bank account. You will need a business account, a savings account, and a credit card allotted exclusively for your business-related ventures.
Some of these credit cards can give you cashback on certain purchases. Avoid using cash as much as possible and ensure all your transactions happen online. Using e-money will keep your expenditures in check.
This option is not only better for your business, but also will save you a great deal during tax payment season. A digital transaction will always come with a receipt which will help you keep track of your expenses. This is your very first step at business expense tracking.
Step 2: Take good care of your receipts
You probably did not think THIS would be a part of tracking expense for your small business but, here we are. You must keep track of each of those tiny little paper pieces that you receive after purchasing your business.
This can be over-burdening but if you try to follow some simple steps, it may not be as hard as you think it is. Just have a separate envelope for collecting all these paper receipts and try to fill your receipts daily.
You can use binders to meticulously store all these receipts and you will not have to stress on whether you have dropped some of them at a place. Scribble the purpose of the purchase on the receipt so that even if you do not account for it just on that day, you do not have to wrack your brains trying to recall why you made that purchase.
Keeping a business calendar ready on Outlook can also help you to track your purchases and the reason behind each of them.
The trouble with maintaining paper receipts is eliminated with the advent of digital receipts. You will easily be able to track your business expenses with good software available online. When you use online invoice and expense tracking software to track expenses, all you will need to do is take a snap of your receipts and link them to your expense records on the app.
It is that simple and easy. You wouldn’t need to keep a separate file or a binder in order to store your receipts for future use. Half of your job will be done by this software and you wouldn’t have to raise a finger.
Here is how you can maintain your receipts using the Billdu app for iOS devices. Just click a snap of your receipt and upload it to the Expenses section on the application. Select “Open With Billdu” and the receipt will open up on the application.
You can also use the Billdu Web app and your Expenses section will keep track of all your receipt details. The Expense section on the web page looks like this.
Step 3: Make a detailed spreadsheet
If your business is still very new and you are just starting with small paid projects, then it is probably the best option for you to make a spreadsheet out of all the expenses that you are making.
This is easy and wouldn’t need you to sit for hours trying to figure out what to do and how to do it. Even if you have very limited knowledge of keeping records and handling data, you will do just fine with a spreadsheet.
A spreadsheet will help you to categorically segregate all your company expenses, will give you a platform to make daily updates about every new expense that you had to do, and will also be available to use for a prolonged period of time.
Business expense tracking is made simple and accessible with a working spreadsheet. The columns of your spreadsheet need to have categories such as date, vendor, cost, purpose, mandatorily.
Your spreadsheet will give you an idea as to what component of your business is needing hefty sums of investments and which avenues are yet to flourish properly.
Step 4: Use software
You may use complex accounting software if you feel that you would need complex data management. Or you can just go for simple and easy-to-use small business invoicing software such as Billdu and your work will be smooth and hassle-free.
You can easily use the predefined invoice templates in this tool. It is all very user-friendly and will help your business reach greater heights. And of course, Billdu comes with powerful business expense tracking features.
Track expenses for small businesses to ensure that your business works just the way you want it to and that everything goes according to your plan. There is a 14-day free trial available for you to get accustomed to the software and receive all your business-related advice in one place. Start your trial now.