How to Track Small Business Expenses

Tracking expenses for a business is among one of the most important tasks because expenses are a major source of cash outflow, where a lack of clarity with regards to expenses can mean the difference between survival and closing down.

Business records are important to keep track of all expenses but business transactions are highly complex. At any given time a business is spending on digital marketing, traditional promotions, office equipment, utilities, and so forth. Keeping a track of expenses, therefore, requires an appropriate system that stores the data received from business proceedings and analyses it.

As your local accountant in Castle Hill and Greater Sydney, we help business with their day to day bookkeeping. This is vital to the achievement of long-term business goals and every small-scaled business should reap the fruits of digitized record-keeping by using easily available software and application at pocket-friendly prices.

Open a Business Bank Account

The first step is to create a separate business account where the goal is to use business income to pay for business expenses so that personal and business expenses are distinguished and it becomes easier to make strategic decisions for pricing and production.

This business account needs to be functional for business transactions only so that it becomes simpler to simply use bank records to tally business transactions and expenses. Multiple expenditure accounts make it confusing, and also take up much more time in reconciling bank and business records. Also, make sure to have a separate business credit/debit card to take care of business transactions only.

Store Receipts Properly

It is important to store receipts in a digital format. This is because the strength of the evidence of a transaction lies with captured images receipts. To optimize the record-keeping procedure, it is important to receive digital receipts of business expenses from suppliers. In this way business expenses can be recorded in real-time and save any hassle and time spent in matching expenditures at the end of a business period.

A good way to record expenses in real-time is to use mobile apps for expense management and accounting which allow recording the receipts promptly. Apps like these give a one-stop solution to recording transactions, including storing pictorial images of receipts and automatically assigning expenses to appropriate expense heads.

As your local Accountant in Castle Hill and Greater Sydney, we can suggest some good applications and software record expenses. One good tip is to ensure that you keep track of expenditures by aligning expenses with your business calendar. In this manner you can associate expenses with business meetings, helping in identifying and categorizing expenses.

Make a spreadsheet

If you are just starting out and don’t have an accounting system, the spreadsheet is the simplest way to track expenditures. Make sure to record details of transactions such as the date, category, vendor details, cost, and purpose of the expenses. This information is critical in record-keeping as well as in making strategic decisions for the business’s future.

It is important to categorize your expenses such as marketing, client meals, home offices, travel, and office supplies. Spreadsheets are multi-purpose, in that they can be used to record transactions as well as calculate taxes and develop insights for strategic decision-making. To create a spreadsheet, the first step is to identify the software which would be most suitable. Popular options are MS Excel and Google Spreadsheets, but some other tools might also be available for business owners. Next, expenses need to be categorized according to their nature.

Categorization of expenses

Fixed expenses:

These expenditures are fixed rentals, service charges, and web hosting expenses among others that stay fixed over some time (month or year).

Variable expenses:

These expenses fluctuate and can include web designer charges, extra working hours expenses, office supplies expenses, marketing expenses, training expenses.

Expenses can also be classified according to the vendor with the help of an expense-tracking spreadsheet, which can be used to calculate expenses for each vendor. This information can help evaluate vendors in case they are supplying the same items to see which one is more cost-effective.

As your local accountant in Castle Hill and Greater Sydney, MYM Accounting and Business Consultancy can help you implement a basic cloud-based accounting software such as MYOB or XERO to help you manage your finances.

Expense Tracking software

Many different apps can track expenses and sync with your existing accounting systems. Expensify is a user-friendly app that allows tracking of expenses and facilitates business owners to optimize their tracking system and measure the expenses and summarize them into a single record. This expense tracking software categorizes expenses into periods, and also provides invoice proofing through screenshots so that reimbursement of these expenses can be made within available budget limits.

It also automates record-keeping of credit transactions made through banks where the company-issued credit cards given to employees can be synced with the company credit card which is given an online account. In this manner expenditures for different employees can also be stored. Moreover, it generates employee expense records and instant email notifications of transactions so that managers are kept in the loop at all times. The app is pocket-friendly for its users with long-term business accounting and record-keeping benefits.

Tracking business expenses is a must if you want to scale your business.

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