Although accounting and financial tracking can seem like frustrating and daunting tasks, you should never overlook them. They can mean the difference between a successful business and one that survives on little to no revenue.
Tracking expenses is something Americans aren’t particularly fond of doing, given that 56% of Americans have less than $1000 in their bank accounts and 25% have less than $100.
Although this could be due to many reasons, 44% of higher-income Americans that report living from paycheck-to-paycheck say their financial troubles are due to unnecessary purchases.
Careful financial planning can benefit everyone, especially small businesses that are looking to grow and expand. If you’re interested in finding out how an expense tracker can help your small business thrive, follow along!
Why Your Company Needs a Reliable Expense Tracker
1. To Know Where Your Cash Goes
This first point goes without saying. Tracking your expenses will make you realize where all your money is going. It will allow you to pinpoint areas in which your spending might exceed what you expected and will help you identify possible areas that need more funding.
You can’t cut back on spending if you don’t know what your business is spending money on. This is the first step to getting a hold of your finances.
2. It Helps You Become More Organized
Although the initial accounting process can be a month’s long ordeal, creating a routine and becoming more disciplined will make the financial tracking process a habit.
Instead of trying to keep track of everything in an excel sheet or some spare napkins that were in the conference room, consider incorporating an automated bookkeeping software. This particular expense tracker requires no experience and can make the process a million times more manageable.
3. Identify Any Existing Debt
Starting your own company is financially exhausting, and can often leave you in debt. Making a list of your debt history up to date in an expense tracker will allow you to cross off the ones you’ve paid off and identify the ones you haven’t.
For the latter, make sure to pay at least the minimum due on each one. For the debt with the high-interest rate, try to pay more than the minimum due. Once that one is paid, focus on speeding up the repayment process of other high-interest debts or loans.
4. Prioritize Your Spending
Now that you’ve identified where your money is going and what debts are still waiting to be paid off, it’s important to prioritize your spending.
Make a list of the company’s needs, things that your company must pay for every month. Label these as your fixed costs and try to find ways to reduce them.
Label all other expenses as wants. These are not vital to the smooth functioning of your business. Setting a limit for how much the company can spend on these wants will limit your spending.
As you’re starting this process, don’t forget to think about and investigate what’s likely your largest expense: labor. Tracking the cost of wages, overtime and benefits can be beneficial. You might even realize you have some extra money to further incentivize your employees with a performance-based bonus!
5. It Helps You Plan Your Financial Future
An expense tracker can give you the freedom to plan your financial future. With it’s easy to use interface, a tracker like ScaleFactor helps you zone in your concentration on how to make more money.
Realizing that tracking gives you a tool to grow your company is powerful. Once you know where you can cut back on spending and where you need to increase spending to boost performance, you will see growth like you’ve never seen before.
6. It Prevents a Potential Crisis
Not knowing where your cash influx is going can lead to a horrible disaster. Failure to track expenses can lead small businesses into a financially troubled place that is hard to overcome without incurring debt.
As mentioned previously, an expense tracker can help you identify the areas of your company that are spending too much. Realizing this issue before it becomes a potentially catastrophic problem can save your small business a lot of money in the future.
7. You Won’t Pay Unnecessary Taxes
Tracking your expenses is a great way to figure out if you’ve been paying all your taxes – and if your company has been paying more than it needs to. This is an area which many small business owners neglect. However, tracking what you should and should not be paying for can help you save money every year.
This works by knowing what your deductibles are and could be. If you track your spending, you’ll prepare yourself to get the most deductibles possible.
With an expense tracker, you might realize that you’re eligible for deductibles you might have otherwise never known about. Since the IRS requires documentation to prove what spending was necessary, keeping an expense tracker can come in handy during tax season.
It is also important to be aware of some tax deductions you can claim if you’re a small business owner including travel, inventory, meals, education, vehicles, advertising and a home office.
8. Measure Your Progress Accurately
You’ll never know how far away you are from company goals if you don’t track them. Setting goals is crucial for progress and for building a company environment that fosters healthy competition and company pride.
Tracking your expenses and profits can help you understand how your company performs year round. If you find that certain months are heavy on cost and don’t bring much revenue in, consider rethinking your business plan.
9. Look Out For Unauthorized Charges
The FTC discovered a group of hackers in 2010 who were using a sophisticated scam to steal nearly $10 million from thousands of debit and credit cards through micro charges over multiple years.
These charges ranged from 20 cents to $10. They bypassed fraud detection software because the scammers typically only made one charge per card. Being aware of potential financial risks like this extreme example can help you identify any potential scams.
An expense tracker will allow you to track everything to penny accuracy, so you’ll know if anything seems out of the ordinary. You’ll also be able to label what each expense was for and when it occurred.
Credit card fraud happens scarily often, more often than you’d think. With the careful eye you’ll develop from tracking your expenses, you’ll begin to notice unauthorized charges before they pose a significant burden to your business.
10. Make Sure You’re Getting Paid
It’s shocking how many small business owners don’t realize they’re not being paid. This occurs when invoices and customer payments are not properly tracked and recorded.
If you’re not keeping proper records and are simply glancing at the numbers from week to week, it might take you months to realize that there’s a problem. Outstanding invoices are common, and the only way to find them is by using an expense tracker.
It will help you identify any late payments and payments that were never made at all. Recording the amount due, the issue date of the invoice and any payments already made towards the bill will help you figure out how much money customers owe your company.
Developing this tracking system also has a statistical purpose. It can allow you to identify how long a typical customer takes to pay his or her invoice in full. Doing so can help you identify if there are particular customers for which you have difficulty collecting payments.
An expense tracker can be a wonderful tool for any small business. It takes the headaches out of bookkeeping and it brings an enormous list of benefits with it.
If you’re interested in trying an automated expense tracker, don’t hesitate to ask for a demo! Out intuitive software automates tax, accounting and finance tasks in order to save you time and money.
We have a team of finance experts, software developers and marketing professionals who all come together to help you achieve your business goals.