If an employee can’t keep track of their assignments and their time, that’s a management problem, and a supervisor needs to step in. If a business can’t keep track of its money, that’s a much more fundamental problem — especially when it comes to small business expense tracking.
Botched expense tracking costs time and money. Considering that small businesses constitute 54 percent of sales revenue in the United States, that’s a lot of money left on the table each year. Although the endeavor can seem overwhelming for a small business, managing your company’s expenses the right way can help boost profits and grow your organization.
6 tips for better small business expense tracking
Crank up your organization’s organizational efforts with these six tips for better small business expense tracking.
Separate personal and business expenses.
Save those receipts.
Record transactions at the point of contact.
Get accounting software.
Track performance regularly.
Consider hiring a bookkeeper.
Let’s look at each tip in more detail.
1. Separate personal and business expenses
Even if you reimburse yourself or your employees, mixing personal and business funds adds unnecessary complexity. It can also cause your business to come under IRS scrutiny.
2. Save those receipts
Save your receipts and make sure you store them properly since you’ll need them for calculating tax-deductible expenses and proof for the IRS in case you’re ever audited.
Low-tech solution: Store them in envelopes and write the date and the purpose of the expense on the outside. Then store those envelopes in an accordion file organized by month.
Higher-tech solution: If you’d prefer a more tech-savvy way of doing things, scan the receipts, turn them into PDFs or take a photo with your smartphone, and store the files electronically. There are many good apps out to choose from for digitizing your receipts. Some to consider include Scanner Pro and the Receipts app.
3. Record transactions at the point of contact
While cleanliness might be next to godliness, timeliness is a close second. Record business expenses as soon after the purchase as possible. You don’t want to end up with messy piles of receipts to dig through.
Taking the time to document expenses the right way, right away, saves time and work later — and it guarantees that your finances are always up to date.
You can also use an online calendar like Google Calendar — which you can sync to your smartphone — to track expenses as they happen. Online calendars allow you to set up alerts for recurring or single expenses as well as notifications for payments you need to make before they’re due.
4. Get accounting software
Invest in accounting software to handle your small business expense tracking needs. While Excel spreadsheets might be a good first step when you’re testing your market, that can quickly get unwieldy. Go pro by putting the finances for your business into a professional accounting solution.
There are many great options out there, including market leaders Quickbooks and Freshbooks. There also are a wealth of niche solutions, such as accounting systems built on top of SMB CRM systems, such as Apptivo, and drop-dead easy to use solutions such as GoDaddy’s Online Bookkeeping solution.
In fact, you could be actively harming your company if you don’t invest in the right accounting software.
5. Track performance regularly
Small business expense tracking allows you to monitor and analyze performance to inform decision-making. Use your accounting software to create weekly and monthly reports on spending and profits. Use those reports to benchmark your business from month to month and quarter to quarter.
Monitoring performance and analyzing the reports will become even more important as your business grows.
Since company growth can happen fast, it’s critical to catch small errors before they become big ones.
6. Consider hiring a bookkeeper
If the task of accurately tracking all your company’s expenses seems like too much, or if you can’t seem to get a handle on it, contract a bookkeeper to spend some time every month going over your receipts and invoices and have them tackle everything within your accounting software. A good bookkeeper is worth the cost if they keep you out of trouble with the IRS.
The numbers don’t lie
Despite their comparative size, small businesses should not operate under the assumption that all they need to handle expense reporting is a pen and paper, or a stack of receipts in a shoebox. Small businesses can, and should, manage their finances using the same tools as larger companies. That means ditching manual systems and instead focusing on technological improvements like automation, mobile apps and digital filing architecture for small business expense tracking.
According to a recent expense management trends report, 87 percent of small businesses doubled their return on investment in one year or less after adopting a web-based expense management system. You can’t argue those numbers.
The above content should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.