Owning a business can be extremely rewarding, especially if you keep track of all your expenses. Many small business owners don’t even realize the amount of unnecessary transactions they make throughout the year. Only to get a big surprise at the end of the financial year, discovering that you could have saved a lot of dollars if you kept a closer eye on your finances.
If you don’t have an effective tracking system in place, you won’t be able to evaluate your spending. It’s vital to every company’s success to keep a close eye on finances. This can become quite troublesome whenever your sales are booming and you receive loads of orders and last-minute expenses.
In order for you to become more financially aware you can try any of the following expert tracking tips:
Open the Right Kind of Account
Many small business owners make the mistake of running their finances through their personal banking account. After a few months your personal and business finances will be so intertwined that it will be difficult to keep track of each separately.
Before you undergo any expenses, open up a business account. This will ensure that your personal finances are company’s finances are separate. Ensuring a much more organized track keeping system.
Also avoid using money within your company card for personal use, this will only result in future confusion. Especially if you want to track your tax efficiently, it’s important that you keep them separate.
Consider opening up a credit account, which will allow your company to build its credit.
To learn more about the reasons why you should consider a separate account, read this: https://www.moneyunder30.com/when-do-you-need-a-bank-account-for-your-business
Cash or Accrual?
There are two main accounting methods used to track expenses; cash and accrual. The cash-basis method is the most common accounting method. It records payments and income as soon as you receive and as soon as you pay. This method uses only cash transactions on-the-spot without any payable accounts.
Accrual accounting is more advanced. It records payments and income whenever transactions take place. Using payable accounts and accounts receivable. These procedures can also be automated. With that, not only will these processes become more accurate, quick, and fraud-free, but also, with paperless accounts payable and receivable they’ll be much more organized.
To monitor your company’s growth, build financial statements, prepare yearly tax returns, and keep track of deductibles, you should keep track of everything. Even if it’s a coffee bought with your business account – keep the receipt.
Keep all the records for any business-related expenses incurred by you and your employees. This includes company meetings, traveling, décor purchasing, money spent on services, and even small items for the office. Remember that it’s much easier to keep track of expenses when you stick to using a business account or credit.
To keep things nicely organized and in one place start an easy-to-follow recording system. Where you keep receipts and other important records in a labelled folder or file cabinet.
For tax refund purposes, make sure you know which payments are tax-deductible and which aren’t. Typically, the following expenses are tax-deductible:
- Equipment, machinery, and assets
- Dry-cleaning, company uniform, and laundry services
- Travel expenses and transport
- Business meetings and catering at work
Use Tracking Software
For small business owners, accounting can be quite the headache. Especially if you’re not naturally gifted in tracking finances. Using systems like Travelbank – expense tracking software, will make your life that much easier.
Cloud-based software makes it easy for you, your accountant, bookkeeper, or other employees to track all kinds of transactions. Having a secure online business expense system in place will also make future transitions to advanced recordkeeping methods much easier.
If you’re not an expert in tracking finances or using specific software that helps with expense tracking, then you should consult professionals. A self-created spreadsheet isn’t always as efficient as a high-quality tracking system. Hire a bookkeeper or a chartered accountant to help you keep track of your finances.
These professionals are usually trained in different kinds of accounting software that will be greatly beneficial to your business. Accuracy is extremely important, missing only a few transactions will result in the wrong information and statistics. Hiring professionals will ensure optimum precision when reading in the numbers.
Paying a salary or a monthly fee can become quite expensive, especially if you’re only starting out. You will have the opportunity to take over the process once the professional has got the ball rolling.
If you purchase easy-to-use online software, then you’ll be able to track your expenses without using a professional at first.
When it comes to finances, you can’t leave it until the last minute. It’s important for your business’ success to track and record all expenses within a certain time. Most owners record everything once every month.
When you leave all the receipts to pile up, you’ll fall behind and become unorganized. If you don’t have any professional help, create a system that is beneficial to your organizational style. Read this to learn more about tracking your spending.
A great advantage of doing expenses tracking on a regular basis, is that you’ll be able to remember transaction much more vividly. Unless you have an excellent memory, you’ll be able to place strange deductions from the bank statements in certain categories. If you leave it too long, you will have forgotten what certain transactions entail. Losing money and track in the process.
Experts have advised small business owners to track as you go. Writing all payments and incomes down immediately will create a much more effective money management system.
Check your business’ performance by reviewing your accounts. Using a tracking method will give you the tools you need to know exactly what you are spending your money on. It’s a great indication of considering cutting back on certain expenses.
Any business can thrive and reach new financial heights when their managers are more financially aware. If you implement some of the tips mentioned in the above article, you’ll notice a great change in how you manage your money matters.