It is easy to get caught up in the day-to-day activities of your business. You forget about checking the everyday expenses that come with running your company. But when you do forget to monitor your expenses, that will cause your business a lot. Monitoring your expenses will make sure your financial information is up to date. It will also ensure that you can claim tax-deductible items and will identify risks if there are any.
Tracking your business expenses shouldn’t be complicated though a lot of entrepreneurs get overwhelmed by the thought. Even if you have a bookkeeper and accountant to do the work for you, not knowing what you are spending on will be detrimental to your business. There are safe, easy, and practical methods to keep track of your business expenditure.
Open Separate Bank Accounts
The first thing you have to do after incorporating your business is to open a bank account solely for its use. You cannot use your personal bank account for your business because when the business fails, it may take your personal savings with it. At the same time, it will be hard to keep track of your personal and business expenses if you do not have separate bank accounts for this.
You may want to open at least two kinds of bank accounts for your business. One is for expenses and the other one is for the business savings. This will keep the money separate as they are dedicated to different things. It’s the same thing with credit cards. Open a separate credit line for your business and don’t tie it with your personal credit line.
Digitize All Your Receipts
It’s easy to monitor your expenses if you have all the receipts with you. There’s a simple solution to this. Every time you spend on your business, scan the receipt. You don’t even need to manually input the details of the receipt. Scanning it and labeling it correctly is good documentation. When you need to revisit some old transactions, having scanned copies of the receipts will make the process easier.
At the same time, this is also helpful for your accountant and bookkeeper. They can file the right taxes and deduct items your business is eligible for. When the Internal Revenue Service (IRS) wants to investigate (which it does randomly sometimes) something in your business, having digitalized copies of all business transactions will make the process smooth.
Record All Expenses Promptly
The reason why some businesses are having a hard time monitoring their expenses is because they don’t record them fast enough. After the transaction, open the software and log the transaction. It doesn’t have to be a sophisticated program. Even the Excel sheet will do well recording the business transactions. Do this every end of the day before going to bed. This way, you won’t be inundated by receipts you haven’t recorded yet.
You should not only record your business expenses but also your business sales. If you can, attach the appropriate receipts per transaction. This will keep your financial record organized. Every month, make it a point to get a copy of your bank statement, so it’s easy for your bookkeeper to balance the sheets.
Use Bookkeeping or Accounting Software
Don’t scrimp on good bookkeeping or accounting software. It’s one thing not to want to buy a premium membership for a graphic design platform. It’s another thing to not want to invest in accounting software. Yes, the same program that will make operating your business a breeze.
There is a lot of accounting software out there. You have to choose the right one with the features you need for the business. You might have to pay for the premium membership so you can unlock the features. That way is more secure, too. So what should you look for in accounting software? You should want one that can be integrated into your inventory software (or maybe buy a program that has features for both).
When you want to organize your personal finances, don’t you keep track of your everyday expenses? It is the same thing you should do when running a business. You have to keep track of every single transaction that comes in and out of your company. Whether it’s for buying ink for the printer or something bigger and more expensive, every entrepreneur knows the importance of monitoring expenses, sales, and discrepancies in the balance sheet. This will allow you to address financial problems as soon as they become apparent.