It’s the holiday season. Thanksgiving, Black Friday, Cyber Monday, and Christmas came bearing presents and expenses, lots of them too! While you must have received a handful of gifts throughout the season, we are sure your small business's expenses were no less. But amid all the pomp and show, you forgot to track and manage your expenses. What to do now? How to track these expenditures? Well, fear not. Tracking and managing small business expenses is easier than you think. You must make notes of it as it is imperative to track your small business's expenses. This will help you budget and plan for upcoming expenses.
Fortunately, there are several ways you can put an effective expense-tracking system in place, and that is exactly what we will be discussing in this blog post. This post will show you how to track and manage small business expenses. We'll also provide tips on reducing expenses and improving your bottom line. Let's get started!
What Are Business Expenses?
Business expenses are the costs associated with running a business, whether a small independent operation or a large corporation. This includes overhead costs such as
- rent and utilities
- equipment purchases
- transportation costs to deliver products or services to customers
- advertising expenses
- day-to-day operational items like supplies and office materials
Every business has different needs when it comes to managing its financial resources, so it is important for owners and directors alike to understand their overall expenses and how they affect their bottom line. By understanding these elements of their operations, companies can make smart decisions about allocating their limited capital to see the biggest returns possible.
Why Should I Track Expenses?
When running a small business, tracking expenses can be an invaluable tool for long-term success. Creating accurate spending records helps you understand where money is being allocated so that you can make smart decisions about future budgets, tax deductions, and other financial transactions. Not to mention, tracking expenses also gives you insight into areas of improvement, such as cuts on operational costs or targeting new markets for higher profits. So regarding it, staying organized about your finances within the business could potentially mean the difference between thriving and struggling for years to come.
1. To Create A Budget
Creating a budget is one of the most important steps to managing your small business's financial health. A budget can help you create a plan for allocating resources and setting achievable goals while also helping you identify areas where costs can be cut or more efficiently utilized. In addition, tracking expenses helps build an accurate picture of your spending habits so that you can create a realistic budget that will keep your business on track in the short and long term.
2. Take Advantage Of Tax Deductions
When it comes to taxes, expenses can be your biggest ally. Tracking expenses allows you to take advantage of available deductions and tax credits which can significantly reduce the amount of money you owe in taxes. In addition, a detailed list of all business-related expenses can help you identify deductions that you may have overlooked or forgotten about.
3. Improve Cash Flow
Monitoring cash flow is essential for keeping operations running smoothly. Having an accurate record of when payments are due and when income is expected to come in helps ensure that bills get paid on time and keeps your business from going into debt unnecessarily. Knowing where your cash is going at any given moment also makes it easier to track how much money needs to be allocated for upcoming projects and investments, further helping to improve cash flow.
4. Manage And Optimize Cash Flow
Along with tracking expenses, managing and optimizing cash flow is important. Cash flow management involves regularly analyzing your business's spending patterns so that you can identify opportunities for cost savings. For example, by looking at the expenses of a particular department or product line, you may identify areas where expenses can be reduced or eliminated to improve profitability.
5. Spot Outliers And Identify Cost Savings Opportunities
Tracking expenses can also help you identify outliers in your spending. These are higher than expected costs and may indicate potential areas for cost savings. By monitoring expenses, you can quickly spot outliers and investigate them further to determine if there is an opportunity to reduce spending or increase efficiency in that area.
6. Benchmark Against Other Industries
Finally, tracking expenses also helps you benchmark against other industries. By monitoring your spending habits and comparing them to those of similar businesses in different industries, you can gain valuable insight into how much money is spent on certain activities or services. This information can identify areas where your business may be overspending and help you create strategies for reducing costs and increasing profits.
7. To Ensure PPP Loan Forgiveness
If your business has received a Paycheck Protection Program (PPP) loan, tracking expenses is essential for ensuring the loan is forgiven. The PPP loan forgiveness program requires businesses to use at least 60% of the funds on payroll costs and up to 40% on non-payroll expenses, such as rent and utilities. Tracking expenses will ensure that you comply with program requirements and can maximize the amount of forgiven money.
Tracking expenses is a key part of managing a small business's finances. It provides valuable insight into where money is being allocated and can also help manage cash flow and take advantage of available tax deductions. In addition, with the right tools and processes in place, tracking expenses becomes easier and more efficient over time, so small businesses can focus on growing their operations without worrying about financial mismanagement.
What Is The Best Way To Track Small Business Expenses?
Small business owners have a lot to keep track of; one important task is monitoring expenses. Knowing where your money is going is essential for the success and growth of any business. The best way to keep your expenses under control is to invest in good accounting software with features like tracking vendor payments and creating detailed reports. Large purchases can be made more strategically by keeping up with small expenses. You'll also save time by automating certain processes so you can focus on other aspects of the business. With technological advancements, managing business finances has never been easier or quicker. Investing in advanced software will also ensure that management costs stay low, allowing for better cash flow and improved long-term Profitability.
Stating this, below are some steps to understand the nitty-gritty of tracking your small business expenses. Have a look!
Steps To Track Your Small Business Expenses
Keeping track of expenses is an important part of any small business. Understanding how to properly document and track them accurately can help you keep up with your finances and ensure that no overspending occurs. To help you better manage your company's expenses, here are some tips on tracking them.
Step 1: Open A Business Bank Account
A business bank account is necessary for any business, no matter how small. Keeping your personal and business finances separate; a business bank account will help you do that.
Step 2: Choose An Appropriate Accounting System
Using an appropriate accounting system is the best way to track your expenses. There are many different types of software available, so make sure you choose one that fits your business's needs. This would let you generate reports, view your financial statements, and easily track expenses. Also, an effective accounting system eliminates the risk of human error and ensures accuracy when tracking transactions.
Step 3: Choose Cash Or Accrual Accounting
Cash-basis accounting is more straightforward; it records expenses when they are paid out of the business's checking account rather than when they're incurred. On the other hand, Accrual-basis accounting records expenses when they are incurred, not necessarily when they are paid. So you need to pick between the two to track your business expenses. The most effective and commonly used of the two is Accrual-basis accounting. It is because the accrual method gives a more accurate picture of the business's financial position by matching expenses with the revenues generated by those expenses in the same accounting period.
Step 4: Connect Your Financial Institutions
With the right software, you can connect your accounting programs with your business bank accounts and credit cards. This will allow you to easily track expenses without manually entering each transaction. Not only this, but it will also allow you to quickly reconcile your bank accounts and credit cards, detect any errors or discrepancies in your financial data, and create detailed reports that allow you to make informed decisions.
Step 5: Begin Managing Receipts Properly
You'll also need to set up a system for tracking inventory if you sell physical products. This can be as simple as using Excel or Google Sheets, or you can use a more sophisticated inventory management system like Fincent. When you manage your receipts properly, you easily track your expenses, which helps determine which products sell the best.
Step 6: Record All Expenses Promptly
You'll need to establish procedures for handling receivables and payables. This includes setting up invoicing and payment terms with your customers and vendors and maintaining records of payments received and made. Recording expenses promptly ensures that all financial transactions are tracked accurately and any discrepancies can be caught quickly.
Step 7: Consider Using An Expense App
Consider using an expense-tracking app to make it even easier to track your expenses. Such apps allow you to easily photograph and store receipts, categorize expenses, and set spending limits. This way, you'll be able to monitor your company's expenditures more efficiently and prevent any unnecessary overspending.
By following these tips, you can easily keep track of your business expenditures and ensure that your company remains on the right financial path.
How Fincent Financial Software Can Help You Track Business Expenses?
Fincent is a powerful, easy-to-use platform that helps business owners monitor and track all their financial needs in one place. With the ability to create budgets, manage daily spending habits, and categorize incoming and outgoing payments, Fincent gives users greater transparency into their money management journey. Regardless of where or how your business spends its money - from credit cards to digital wallets - Fincent has you covered. Best of all, reports can be generated in various formats so you can make better-informed decisions about your finances. Let Fincent transform the way you approach tracking business expenses with these below-mentioned state-of-the-art characteristics. Then, take a dive into Fincent's featureful world.
Budget and Forecasting
Fincent's powerful budget and forecasting tool allow you to anticipate spending needs and ensure that any changes are accounted for in the overall financial plan. It helps you set up budgets, monitor spending trends, and generate forecasts that can help you make sound financial decisions.
With Fincent's automated reports feature, you can save significant time in terms of summarizing financial worksheets. In addition, these reports are easy to read and understand, helping you quickly identify potential issues or areas for improvement.
Fincent's real-time dashboards provide you with an easy-to-use visual display interface that provides accurate data to review your spending and identify any unusual or suspicious activity. As a result, you can easily gain invaluable insights into where funds are going.
Financial Statement Analysis
With Fincent financial statement analysis, users can quickly assess the accuracy of their financial data and make better decisions based on insights drawn from the data. You can use this feature to check that all your income generated and expenses made that match the records, allowing for trustworthy tracking.
Business Insights and Analytics
Fincent's sophisticated analytics give businesses additional perspectives into how they spend their money, as well as immediate access to financial data concisely. In addition, it provides users with insights into their business performance, helping them better understand their financial situation and plan for future growth.
Fincent's comprehensive expense tracking system lets you easily categorize expenses and track spending patterns to stay on top of your finances. In addition, you can set spending limits and receive notifications when new expenses are incurred, allowing you to make quick decisions.
Security and Compliance
Fincent's security protocols ensure that all data is kept secure and compliant with industry regulations, giving you greater peace of mind about your financial data.
By leveraging Fincent's powerful features and tools, you'll be able to track your business expenses and make sound financial decisions easily. The platform is the perfect solution for businesses that want to make well-informed financial decisions easily. With its comprehensive expense tracking capabilities, you can easily keep track of your business expenditures and ensure that your company remains on the right financial path.
Fincent offers an intuitive and comprehensive solution for businesses looking to track their expenses. From budgeting and forecasting to automated reports and real-time dashboards, Fincent provides the tools needed to gain greater visibility into your spending and make informed decisions about financial performance. With its user-friendly interface and powerful analytics capabilities, Fincent can help you take control of your business's finances today. So try Fincent now to start optimizing your business's spend management journey!
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