Expense tracking starts off great, and then people get lazy. They’re the best intentions in the world, and after a good month or two of great tracking through an app or spreadsheet, people either become overwhelmed with back logged receipts or too many small transactions and just give up. Expense categories go unchecked, and instead of keeping track, it’s easier to say, let’s just start fresh next week, next month instead of digging out.
It isn’t laziness that creates such failures – it’s expense tracking that doesn’t hold up and make sense. When you’re still a solo entrepreneur with limited expenses aside from business credit card purchases, it’s easy to maintain. But once people begin buying for work or your sales or clients increase, everything that made so much sense before crumbles. Creating expense tracking that lasts means planning for the future, not just the here and now.
Start With What’s Important
It’s not the tools you use; it’s the foundation. What’s important? What do you need to track? Different companies have different needs. Size, structure, function, and purpose all create different significant elements that need tracking.
For example, a service-oriented business that takes in subscriptions and has infrequent travel costs will require a different approach to expense tracking than those who have inventory purchases that require daily expenditures. A solo consultant will require much simpler metrics than a company with multiple employees with various spending tiers and project-based needs.
Before you choose tools and categories, think about what you need to know from expense tracking. Will things be billed back to clients? Do some people have spending limits? Is this for tax purposes, bookkeeping purposes, or both? What will work best for what you’re looking to accomplish?
Choose Tools That Actually Work for You
Expense tracking fails when people seek tools that they think will get the job done without really assessing what tools work best in real-world scenarios. Are you using something with the best interface but requires levels of navigation that take too long for anyone to care?
If you operate nearly 100% on business credit cards, you’ll want a tool that integrates directly with credit card companies so expenses auto populate into your app or spreadsheet. If you have business expenses in cash or write checks, you’ll want an expense management tool that allows for easy receipt capture and simple manual entry. If not, you risk excessive levels of manual entry that lead to quicker loss of tracking progress as people get bored.
Expense tracking that lasts takes the personal style of operating to heart. Tools that feel simple could be too complicated based solely on how you function on a daily basis.
Create Categories That Make Sense
Expense categories often become too vague or too detailed, and both create challenges. Too many categories slow down the process as people forever try to figure out which spending falls under which umbrella; too few categories prevent effective analysis.
For most companies, somewhere between ten and twenty categories makes sense. Office supplies, software subscriptions, travel, marketing costs, professional services – equipment purchases – these make sense for most small to medium companies. They can be condensed down further at a later date if needed for subcategories, but starting out simplifies the process.
Categories should also make sense personally. If you have multiple lines of service or product producing for different clientele sectors, it might make more sense for you to categorize them by client sector instead of accounting-based sections. You need to look at spending patterns for business use – maximize those benefits!
Build Consistency From the Start
The reason expense tracking falters over time is because of lack of consistency. Establish when it needs to be done within normal working procedures – is it at the end of every day? Each week? When are expenses entered? Who’s responsible for this?
For larger companies with more discretionary spending by various individuals, this becomes even more important as everyone operates at a different speed. If one person’s excited to get their expenses put through while another has put them in a folder in the desk for months on end, you’re only creating inequality of potential processing accomplishments.
Set a time frame every week/month when you’ll do your expenses together to help maintain accountability over all. It’s much easier to do the last two weeks’ worth versus three months’ worth all at once – and one person doing it versus having it all done as a team in the same time frame.
Make Receipt Management Work
Receipt management is where expense tracking falters. Paper slips get lost; digital receipts become buried in email hell; suddenly no one knows what’s what over time because documentation is supposed to be kept but how is hardly ever specified.
Capture receipts as they happen – immediately. Have mobile apps for receipt tracking where transactions are tracked as they’re taking place; this way no one has to file them separately later – they’re already imbedded into the data capture system from day one.
For digital transactions received via email, find systems that bring in receipts and attach them automatically to transactions. Anything that gets rid of manual processing saves everyone time and frustration and ensures consistency.
Plan For Growth
The tracking system that works perfectly now may no longer be feasible after hiring employees; right now it may support the right amount of transactions, but in six months it may buckle under pressure without planning for growth.
This doesn’t mean implementing unnecessary parts now; it means understanding which systems will naturally evolve as the business changes, so there don’t have to be overhauls all at once. Can you easily add new users? Can this system sustain itself with more transactions? Will it already integrate with accounting software should you implement that at a later date?
Automate What You Can
Manual entry is the enemy of effective expense tracking. The longer it takes someone to do it and check it means more potential fallouts or holes from sapped interest with complicated processes.
Bank feeds are obviously automated integrations – credit card transactions being brought in ensure expense tracking is faster than not having anyone check up on them manually every month. However, find out if there are ways for recurring expenses (office supplies, subscriptions) where they can categorize themselves right away; miles tracked by GPS instead of manually written down; reminders sent out automatically versus someone having to send an email every time.
The more automation involved with entry reduces ongoing efforts needed long-term.
Review Regularly
No matter how effective systems are set up initially, they all require adjustment over time. Where are business expenses trending? What new types come in? What types fell off? Additions and removals required based on active daily business processes will lessen consistency should you fail to review what’s going on regularly.
Schedule appropriate check-ins every quarter – do any categories still make sense? Are subcategories needed? Did anything come in automated incorrectly? Are your check-ins for info still adequate?
If you’re tracking items you don’t need because you’ve never re-evaluated what’s going on since inception, it’s destined to fail.
What Makes It Work Long Term
Expense tracking that lasts must be simple enough to implement with consistency, automated enough so manual involvement is minimalized but enough flexibility exists so adjustments can be made should the business change overtime.
Finding something that works out of the gate is integral so you don’t force yourself to constantly adapt – you want something that recognizes how you adapt naturally so you don’t waste your efforts establishing guidelines when potential downfalls exist.
Perfect cataloging isn’t essential; accountable transparency where money’s going is so appropriate decisions can be made down the road or effectively utilized for tax purposes is everything! If anything requires excessive manual interventions along with critical thinking about unexpected changes, it’s destined to fail!
