Are you looking for ways to track your business expenses? Frankly, it can be difficult to pick the best ways to do that, especially if you’re still starting in business, considering the host of opinions available offline and online.
Finding a concrete and proven way to track business expenses at an early stage of your startup journey, plays an important role in solving half of the challenges you may encounter in business. It is essential to take all necessary measures to bootstrap your business as every dollar matters for startups.
To help you set the foundation of your finances, this article shares the five best ways to track business expenses.
1. Open a Business Bank Account
Using the same account for your personal and business transactions is one quick way to arrive at messy business financial health. It’s almost a nightmare to track your business income and expenses at year’s end.
One key to excellent financial health remains to keep a separate account for identifiable business expenses. You’ll find this tip helpful when it’s time to file taxes or do audits. Also, if you ever need to take a loan to cover the flow shortfall, the lender likes to see that you have an organized financial life.
So it is recommended to open a business checking, a business credit card, and if the business requires, merchant services accounts. It helps to have a dedicated business card for your business. This helps the business build a strong credit history necessary for optimal financing terms as well as keeps personal, and business spending separate which will prevent bookkeeping headaches later.
2. Use Tools For Tracking
Tracking all outgoing expenses helps you to keep an eye on your spending habits and know when to make adjustments. There are different ways to track expenses. While some small businesses like to use a hand-written expense tracker, others prefer a spreadsheet or budgeting app.
The bare minimum option is a spreadsheet when you first start off. However, it is prudent to switch to a better solution as soon as you can. Organizing your record keeping not only helps to get vital information when needed but also, helps with audits or monitoring spending. An ideal expense tracker must capture dates, expense type, vendor’s name, and amount.
However, as the business expands and spending increases, adding an increased level of sophistication and automation saves time and money. Using expense tracking solutions can improve control over your business finances.
QuickBooks Online has a built-in expense tracking module, whereby connecting your bank, and credit cards, you can categorize and track expenses. There are other payment and invoicing apps that connect with QuickBooks Online making it much easier to manage, review and prepare expense reports.
3. Scan Your Receipts
Manually storing your receipts is cumbersome and outdated. With manual methods, a receipt can easily slip through the cracks, get misplaced, or there may be errors when manually entering data. This is not discrediting storing physical receipts, which may be mandatory in certain circumstances, but it’s best to incorporate digital scanning into your process.
It’s easier to digitize receipts by scanning them with a mobile app (for eg: the QuickBooks Mobile app) or taking a picture and emailing it to a secure email ID which then uses OCR technology to extract data from the receipt and add it to your journal entry (for eg: Dext).
4. Delegate Bookkeeping
Effective bookkeeping goes a long way in helping a small business grow. Documenting business cash flow and expenses allows you to monitor the overall business’s financial health. With a digital accounting software tech stack, record keeping can be simplified.
Multiple types of research including an IDC 2015 research show that 50% of employees’ time is spent on manual documentation tasks. Outsourcing record-keeping or bookkeeping, therefore, saves 50% of each employee’s daily man hours which could be instead redirected toward more productive tasks. This allows you (mostly owners tend to manage tedious bookkeeping tasks themselves initially) to channel your time to more strategic revenue generation activities.
Cloud accounting software also links to your business bank account and credit cards, so you get improved tracking within your books.
5. Review Your Expenses Regularly
Without data analysis and application, gathering and storing data is of little or no use to your business. So, having an accurate record of your business expenses is not enough. You need to review your expense log from time to time.
Reviewing your expenses gives you a clear understanding of your business’s financial health so you can strategize better for growth. For instance, you can analyze your monthly spending to determine which areas of your business yield more results and where you need to pump in more cash. Here’s a pro tip: ensure you categorize the expenses to match each cost to the business sector it affects and, possibly, the results it yields.
Gear up your Financial Management
Small business accounting tracking is not an uphill task. At least not with many digital accounting solutions that make process management easier. Accountero helps startups and growth-focused businesses with their finances. Accountero is a ‘built for founders’ financial platform that offers digital bookkeeping on a free tech-stack, high-level reports for business owners, forecasting tools and on-demand access to professionals like fractional CFOs, tax advisors, funding experts and more, who can help with tax planning but also with SR&ED rebates and other grants. Talk to us today so we can help you to stay focused on your business growth, while our experts manage the finances.