Tracking business expenses doesn't always need to a be painful experience. If your small business is equipped with the right tools, tracking business expenses can easily be incorporated in to day-to-day operations. Managing expenses actively provides more visibility and more awareness. With this knowledge, it's simple to identify opportunities to improve cash management and increase profitability. When you know exactly where your money is going each day/week/month/etc., you can make informed decisions, reduce risk, and accelerate growth trajectory.
They say wise people learn from their mistakes and the wisest learn from other peoples mistakes. So, here are some mistakes we have seen small businesses make while tracking expenses that we recommend avoiding:
1. Blurry lines between personal and business banking account(s)
The last thing you want to do come tax season is go on a digging excursion through old account finance records in an effort to separate business expenses apart from personal expenses. To work smarter and not harder, small businesses benefit from opening a single business account dedicated solely to managing all business related finances. SME business accounts should set up both a savings and chequing account, plus a business credit card. When it comes to making the most out of business costs and transactions, a credit card can be very rewarding.
2. Unorganized receipts
Paper receipts are difficult to keep organized. A smart approach would be to learn how to digitize your receipts and to get into the habit of organizing expenses online. There are many new applications and software to provide solutions to make this process much less manual.
If you are wondering about how you can take a traditional process and make it digital, or more specifically, how you can move a paper receipt online, many applications provide scanning features to simplify the task. We recommend labeling receipts and organizing receipt folders stored in the cloud to save you the annual headache during tax season. 3. Spreadsheets Spreadsheets can be a great way to hold your business accountable and to get a high level view at all expenses across the business; however, it is very likely that your company will outgrow the spreadsheet and demand a more secure system to manage all business finances. A spreadsheet is an effective way to record expenses early on the business journey, but as the business grows so shall its expenses and therefore, your need for a more sophisticated tool will grow too.
The solution lies in cloud accounting software services. Using an accounting system is a great way to protect your business and to ensure expense data accuracy. There are many benefits to accounting software solutions such as most, if not all, integrate with business accounts and automatically organize everything. In addition, this a very secure way to manage expenses. Paper receipts go missing, hard drives crash, but data stored on the cloud keeps all records safe.
Keep a close eye on your business expenses, whether they are stored online or in print, to ensure that you have a pulse on your company's cash flow so that you can make informed decisions and forecasts all whilst staying within your budget.