Tracking your business expenses (or budget tracking) is important, but can be a major headache if you don’t have the right processes and systems in place. Sorting through endless receipts from months gone by is no way to spend your valuable time. You need to get organized!
Here are six (easy) tips to help you track your business expenses.
Separate Business & Personal Accounts
Are you still using your own bank account for your business? It’s time to open a business account! Keeping separate business and personal accounts will save hours of work, unnecessary overlaps and mix-ups, and make it much easier to keep track of deductible expenses. It will also keep you from getting into trouble with the IRS if you get audited. A separate account could even entitle you to better rates on card processing fees, as some banks offer reduced fees to business account holders.
Make Time To Review Your Expenses Each Week
Managing your expenses is a crucial step in ensuring that your business is on the right track. Setting aside something as small as 15 to 30 minutes each week will give you enough time to track down your receipts, invoices and payments and record them. An even better option, although not always possible, is to manage all your business’ receipts and invoices as soon as you get them. This helps reduce the risk of losing or forgetting about them. Regularly reviewing your expenses eases the process of building financial statements and preparing tax returns.
Keep Your Business Records In The Same Place
Keeping track of your records or referencing a particular receipt becomes difficult when you are keeping your records spread out in different places. Find a system that works well for you to document and file your records for easy referral. Additionally, only keep the documents you need. You have too much going on for your record-keeping to be cluttered.
Pro Tip: Organize your records by fiscal year to make it easy to grab the documents you need and to get rid of the ones you no longer use.
Stay Organized With Software Programs
Whether you decide to deal with your expenses as you get them or set aside a particular time each week, a software program may be what you need to stay organized.
There are a wide variety of handy software programs to choose from that make it easy for business owners to track expenses. A quality software program will not only help you better understand your business but also save you time by making it simple to create expense categories, upload receipts, match expenses and generate profit and loss reports. Some accounting programs even enable you to link expenses to line items on your tax forms, which will significantly reduce the time it takes to prepare your tax returns.
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Hire A Professional
Although it may be tempting to do your bookkeeping and accounting yourself, it usually isn’t worth it in the end when you consider the time, mistakes and stress involved. A professional will almost always find more deductions than you know exist while keeping you penalty free. Perhaps most importantly, hiring a professional will free up your valuable time so you can focus on other critical business activities. Running a business is hard enough. Get help from a professional and let them manage your bookkeeping and tax requirements.
Track Your Outstanding Invoices & Customer Payments
If you’re not keeping track of the amount you’re owed, it could be months before you realize you’re collecting payments late or even missing them entirely. Create an A/R aging report which categorizes your business’ accounts receivable by the length of time an invoice has been outstanding. Once you have this handy, you will be able to review and quickly identify accounts that are current, past 15 days, 30 days, 60 days, 90 days and older. Regularly monitor your A/R aging report efficiently manage and collect on your accounts receivable.
Bottom line, tracking expenses is vital to understanding your business’ costs as it continues to grow. By neglecting these simple steps, you will have a harder time gaining the necessary visibility into the financial health of your organization. Using a software like ScaleFactor makes tracking expenses simple. Upload your receipts on-the-go and see all your expenses in one place. Gain the visibility you need to run your business and request a demo today!
Editor’s Note: This post was originally posted on February 2, 2017 and has been completely updated for accuracy and comprehensiveness.