Business Expense Tracking Tips

Businesses take deliberate steps to improve their funds, whether big or small. One thing they might do is make it easier to keep track of their work expenses. Businesses have many different costs that they need to pay for. If you work in accounting or finance, learning to keep track of these costs can help you do your job better. Read this piece to learn why it's important to keep track of your business expenses, six steps to do so, and some useful tips.

How to do your business expense tracking

Using small business accounting software is the best way to keep track of your business expenses. It makes it easy to keep track of your expenses, put them in the right category, and get up-to-date financial information. It's very important to remember this when it comes to taxes to ensure you get all the tax breaks possible. You can keep track of bills by hand, but you should only do this if you only have a few business costs to keep track of.

Open a bank account for your business

It's much easier to track and organise your work expenses when they are separate from your own. That brings us to the first step: opening a different bank account for your business. For every business, this might look different. If your business is formed or you need to write or receive checks in the name of your business, you'll need a "business bank account." Your bank clarifies that this is the kind of account they offer. 

Being a sole proprietor means you don't have to send or receive cash in the name of your business. This means you can use a personal bank account as your business account. In this case, keep a different card for costs related to your business. That way, accounts won't get mixed up. The same goes for credit cards—keep one for business spending only. When it's all said and done, you never want to have to sort through receipts to separate work and personal costs. That's not only a big pain but also makes you more likely to put off the next step, which is to sort your costs into groups.

Pick out accounting software

To keep track of business costs, the next step is to get accounting software to keep records automatically and keep track of each cost. Accounting software makes it easy to track and organise your business's spending. The best accounting software has tools for making reports that show how your business costs changed from one year to the next. There are many free accounting software tools for businesses, so you won't have to spend much money to get accurate records.

When you set up your account, you can choose whether to report your income and expenses using cash or accrual accounting. When you get paid, cash accounting records the deal. With accrual accounting, you record every bill and payment you get.

Pick a credit card for your business

If you choose a business credit or corporate card, keeping your personal and work costs separate will be easier. You can also build your business credit score by getting a business card with your EIN. This can help you in many ways in the future. 

Link spend management and accounting software

It is important to pick accounting and spending control software to automatically track your spending. Some business cards have spend management software built in. This software can match receipts, automatically categorise expenses, set custom spending limits, and connect to financial software. This lets accounting software like Quickbooks or Freshbooks send your card transactions instantly so they can make expense reports for you.

File your receipts  

Make sure you file your receipts as you go to keep accurate records of your business costs. Every paper receipt and another piece of paper, like bank records, that the ATO asks you to keep for at least five years. So, put paper receipts in boxes and don't forget to write down why you bought each item on the receipts. You can also name and arrange the folders based on the dates or types they belong to.

Accounting software mobile apps and business spending tracker apps that you can connect to your accounting software have made it easier to keep track of business costs. These apps keep digital copies of receipts. The camera on your phone can scan papers, and you can even store them in the cloud. The records also sync with your books, making it easy to track all the transactions.

Start keeping track of records correctly

Using the mobile app with your accounting software is another way to ensure you're keeping accurate records of your business costs. There may not be such an app for your software, but you can use an expense-tracking app that works with your software. You can usually handle your expenses while you're on the go with these apps. You only have to take a picture of a receipt and upload it to your software. The image will then be saved and later linked to the right expense. The paper can be used to make an expense report if the cost can be reimbursed.

Use software to put each cost into a category

It's often helpful to use business or accounting software to set up a way to record your costs, no matter your chosen accounting system. Business software can help you keep your financial data correct and up to date, and it can also make the process of writing easier. You can look up information about the different kinds of apps online. There may be types that work better for bigger businesses and types that work better for smaller ones. Pick software that lets you compare costs and put them into different groups if possible. Keep track of all your costs, like petrol, food and flights, and keep the papers.

Keep an eye on both large and small spending

Keeping an eye on your company's spending from both a big picture and a small detail point of view is important. You should regularly look at the big picture of your company's spending, along with the split of the different types of business expenses.  Spend management software can help because it makes it easy for any employee, merchant, cost category, or department to see your transactions. This software can also show you if you're paying more than the average business in the same category or with the same vendor.

Write down and look over your expenses 

Keep track of all your business costs by writing them down. When it's time for an audit, you can go back and look over them. If you change your mind about using an automatic method to record your expenses, you might want to look into software or apps that let you enter your expenses by hand. You could also write down your spending at set times, like the end of each month or every two weeks. Regularly sort your business costs into categories and use them to help you make decisions. 

Hire an accountant

You can track your business's spending better if you hire a bookkeeper. A bookkeeper helps businesses learn about their transactions and funds and keeps track of their money. A lot of bookkeepers work as contractors or as freelancers. A lot of their work may also be done from home. You can look into different accounting services online to find ones whose prices are reasonable for your boss. 

Select a way to record

You can write down events by hand or make your spreadsheet. But if you want to make fewer mistakes, use accounting software that does the work for you. When you use small business accounting software, all your financial data stays accurate and current. This makes things easier for you in the long run. If you really don't want to do your books, you can hire an accountant or an in-house manager. However, for a small business, this is usually too expensive.

Advantages of Keeping Track of Business Expenses

Keeping track of small business expenses has several benefits:

• Put books in order: If your financial statements are correct, you'll be ready for anything, like filing taxes, an IRS audit, or asking for a loan.
• Being clear about where in your business you're spending your money. This makes it easier to figure out where you can cut costs in your business to make more money.
• You can save money on taxes by deducting many small business costs. This can lower your net income. When tax time comes around, if you carefully keep track of your spending, you will have proof to back up any claim for tax benefits right there in your financial records.
• Better plans for money: Looking at your spending and making reports to find patterns, like spending too much, can help you make changes and plan better.
• Find fraud: Any kind of fraud is easy to find when you keep an eye on your spending.

Problems with keeping track of and controlling business costs

It's usually easier to keep track of business costs when the company is smaller. Of course, even the best businesses have a hard time keeping track of their costs.

The sheer size of it all

It can be hard to keep track of all the daily costs that need to be paid for. For example, it can be hard to keep track of tail spend, which makes up 80% of business deals but only 20% of costs. It can be hard to keep track of and organise business expenses because there are so many of them.

Human mistake

People will always make mistakes when systems depend on them. It's harder to improve manual processes because mistakes will always happen in some way. That's why so many companies are looking for the best ways to digitise and manage their money-related tasks.

Delays in approval

As a job for keeping an eye on money and approving it moves to the next person in the accountability chain, an expense report could be missed or forgotten, which would slow down the approval or reimbursement process.

Fraudulent spending

Keeping track of and managing your business expenses by hand makes it hard to make sure that every single one is correct. This makes your business vulnerable to expense report scams, which is another reason to make the process of tracking business expenses automatic. 

Delay in time

Usually, expense audits only look at financial records at the end of the month. This means that by the time you lay out all the expenses, your information may be outdated and less useful. When you're in business, you need to be able to see how much you're paying right now and make changes as needed.

Conclusion

You now know how to keep track of the money your small business spends. We understand; it's quite a bit. Many small businesses find it hard to keep track of their costs, and it takes a lot of time, which is their most valuable asset. The Kalculators can help you keep track of your small business expenses if you don't want to do it yourself. We will help you file the paperwork you need to to start your business, do all of your monthly bookkeeping, handle payroll and payroll taxes, prepare both your personal and business income tax returns, and keep track of your small business expenses like a pro for a flat monthly fee.

Frequently Asked Questions

Why is expense tracking important for businesses?

Expense tracking is crucial for businesses as it helps maintain financial health by providing insights into spending patterns, identifying areas for cost-saving, ensuring compliance with tax regulations, and facilitating accurate budgeting and forecasting.

What are the benefits of using expense-tracking software for businesses?

Expense tracking software offers several benefits, including automation of expense reporting processes, real-time visibility into spending, integration with accounting systems, customisable reporting features, and enhanced compliance with expense policies.

How can businesses effectively categorise expenses for tracking purposes?

To effectively categorise expenses, businesses should establish clear expense categories relevant to their operations, use consistent labelling and coding conventions, regularly review and update categories as needed, and leverage software features for automated categorisation.

What strategies can businesses use to streamline expense-tracking workflows?

Businesses can streamline expense tracking workflows by implementing digital solutions for receipt capture and storage, setting up automated expense approval processes, providing employee training on expense policies and procedures, and leveraging mobile apps for on-the-go expense tracking.

What best practices should businesses follow to ensure accurate expense tracking?

To ensure accurate expense tracking, businesses should require timely submission of expense reports, reconcile expenses regularly with bank and credit card statements, maintain documentation for all expenses, conduct periodic audits to identify discrepancies and encourage open communication between finance and other departments.

How can businesses prevent fraud and unauthorised expenses through effective tracking?

Businesses can prevent fraud and unauthorised expenses by implementing robust expense approval workflows, enforcing segregation of duties, conducting regular audits of expense reports, monitoring for unusual spending patterns, and educating employees on the importance of ethical behaviour.