When you have the correct tools, tracking company spending becomes a lot less painful. These tools will assist you in making tracking company spending a regular habit. As a small company owner, this will allow you to keep a closer watch on how much you’re spending. Furthermore, greater expense management will enhance profitability.
Monitoring your company spending also simplifies tax season because many expenses may be reported as write-offs. If you keep track of your spending on a regular basis, you are less likely to overlook potential deductions. This implies you’ll have to pay less in taxes (or get more back).
1) Business account:
Self-employed people and small firms may discover that the distinction between personal and company funds is hazy. When it comes time to file your taxes, you may find yourself searching for business costs amid your groceries and apparel purchases.
Open business bank accounts to keep track of all business-related spending. Then, for all company purchases, utilise your business accounts. Using a budget tracker makes it easier to organise your finances, giving you more time to focus on the essential things.
It’s also a good idea to charge your company costs to a credit card that offers generous rewards. Some credit cards provide cashback on expenditures. Others allow you to accumulate and earn rewards for travel and accommodation. Forbes has compiled a list of some of the top business credit cards.
When feasible, experts advise avoiding the use of cash. Cash is too simple to spend, difficult to manage, which only has a receipt as a record, as opposed to a digital transaction, which has a record in your bank account as well as a receipt. Using debit and credit for transactions is beneficial for a business, better for tax purposes, and certainly much better when you are audited.
2) Save the receipts:
Here are some ideas for keeping your receipts organised:
For professional paper receipts, maintain a separate folder. If you can’t commit to organising the receipts on a regular basis, take some time once a week to do it. Prepare one per month at the start of the year and organise your receipts accordingly. With a separate file folder for each type – personal, business, etc. – recording receipts will be much simpler. Don’t forget to put the objective of your payment on the receipts. It’s a good idea to retain a thorough company calendar on either Google or Outlook as a backup.
3) Maintain a spreadsheet:
This option is appropriate if you want a low-tech approach to managing your spending or if your organisation is just getting started. However, when your firm expands, you’ll want to utilise a more complex tracking approach. One approach is cloud accounting software, which is discussed more in the next section.
Rather than using automatic expenditure trackers, creating your spreadsheet from start entails manually keeping a count of every expense you incur during the day. You’ll need to create your groups and organise them into different columns.
Spreadsheets are very simple to load into accounting software for bulk expenditure entry. Most accounting software will work with Excel or Google Sheets.
4) Cloud accounting software:
According to Accountex, by 2020, more than 90% of small firms will be using cloud accounting software. Owners desire to access their financial information on their cell phones, which is one of the main reasons for this high adoption rate.
Utilising bookkeeping/accounting software on the move is an appealing feature for active businessmen who may not be able to go into the office on a regular basis. You may access a network connection with the touch of a finger when using mobile cost tracking. Cloud accounting software also allows small company owners to enter costs while on the road, whether they’re on their way to a conference or meeting with a customer.
This software also links to the bank account and credit card, allowing you to quickly and regularly update your spending. This is a compelling argument to choose transactions online over cash transactions. Rather than having to print out invoices and memorise every purchase you make during the day, a good cost tracking tool will just record the crucial facts for you, allowing you to focus on the greater picture.
If you are ever audited, your tax documents will be more secure. Spreadsheets may be lost if your computer crashes. Paper receipts might be misplaced. Accounting data kept on the cloud, on the other hand, maintain all of your records in one secure location.
5) Maintain an Invoice template:
Create an invoice template, either in your accounting program or by downloading one online. Most service-based small businesses provide credit, which means they issue an invoice when a job is completed and allow the client to pay later.
Payment conditions must be specified on each invoice. This should contain your contact information, how to pay you, and when the invoice is due—a decent rule of thumb is 30 days after mailing the invoice. Payment processing information guarantees that no errors occur along the route and that funds are correctly deposited into your account. Setting up payment conditions ensures that you get paid on time and makes it obvious when you should be paid.
It is most important to develop fiscal prudence as a basic organisational value. Symbolic decisions you make or allow as a business owner will permeate your company’s culture. Sure, you may buy that flashy automobile or fly first class on the company’s cash, but keep in mind that your team is always following your lead.
Make an annual or semi-annual review of all your main vendors a normal procedure in your organisation. Also, make sure that any automatically renewing contracts are flagged so that they appear for evaluation and rebidding sixty to 90 days before their renewal.