Gathering and paying operating expenses is one of the biggest challenges that most small businesses face. The Federal Reserve Small Business Credit Survey, 2021 Report also found that more than 47% of small businesses will have to use their personal funds in case they fail to gather operating costs for 2 months. Most small businesses always run on such strict budgets that, if not managed well, can easily send the business down a slippery slope.
Tracking, recording and managing business expenses is the best way to keep track of expenses and avoid any unforeseen and unplanned expenses and major financial issues. If you plan and track well, you can constantly keep track of your money and anticipate any future cash flow slowdowns. When you anticipate this, you can start pre-planning your next moves and plan strategy and leadership accordingly to ensure essential expenses are always taken care of, such as payroll.
But managing business expenses can be really hard, especially if you do not have prior experience in managing business operations and finances. You can start by following some of the best industry tricks and tips to manage your expenses. Read this article to learn all about them.
Why should you keep track of your business expenses?
When you manage your business expenses, you can keep track of your business budget, which can help you develop a sound financial system inside the company. This will also help you completely control your finances and never fall prey to unforeseen situations. When you keep track of your business expenses, you also keep up with all regulations and governmental compliances.
It results in you paying your bills and taxes on time and never overspending necessary cash on fines and penalties. When this happens, both your employees and investors will be confident in your work processes, and your credit scores will also go up and help you get future business loans to plan growth and expansion.
4 Easy Steps to Keep Track of your Business Expenses
If you are following a DIY process to keeping track of your business expenses and managing it, here are some easy steps and tricks to get better at it.
Create a business bank account
If you do not set up a separate business account, there is a high chance that you will find it very hard to close your books at month and year-end. Why? You will have to go through all your expenses individually to know which is a personal and business transaction.
To avoid such situations, create a separate business account so that all expenses are directly accounted for, and you get instant updates about them. Month-end bookkeeping and accounts reconciliation work also become easy for your whole team.
Along with this, you must also get dedicated business credit and debit cards. This helps the business get a line of credit scores along with all the transactions you make. Why do you need it? This will create a solid ground for you in the future when you want to get financial investments and credit from outside sources to grow your business.
Choose between cash and accrual accounting
According to GAAP standards, businesses which have annual turnovers of more than $5 million need to follow accrual accounting methods. The rest of the companies with below $5 million annual turnover can also follow cash methods. Both have their own sets of advantages and disadvantages, so if you are confused about which one is better, ask your accountant.
If you do not have an in-house accountant, you can go for outsourced accounting services and get a consultation from experts at much cheaper rates. After you finalize an accounting method, start accounting for all your transactions and register and log them into a centralized office system. You should preferably also back up these data in a cloud-based backup system to ensure no transaction records and history is lost in transition.
Choose a to automate back office accounting
The back office accounting software industry is growing leaps and bounds and automating most of the repetitive and tedious work in accounting. Things like verifying invoices, sending payment requests, generating invoices, verifying transactions, and categorizing them can all be automated with the right software.
But every industry has its own set of software options for back office accounting work, so before you choose, make sure you do a thorough background check. Since it provides a great level of automation, even many experienced accountants are also using a selection of technology to help in their work. A Sage survey and market research found that more than 58% of American accountants feel that their efficiency and productivity increased after they started software usage.
Categorize all expenses
When you are running a business, you must learn to categorize your expenses to help manage them better. You can categorize them by date, time, departments, expense type, etc. So, when there are any issues with any transactions, you can get quick updates on it if you look by category. You can ask the respective departments to get back to you and save the rest of the employees the extra hassle.
Categorizing these expenses will also help you understand which comes under the deductibles category, and you can benefit from them during tax season.
Start expense management with the latest SaaS solution
Are you struggling on a daily basis to keep track of your business expenses? You can use CRM software to keep track of all business expenses. Or you can also integrate a software like SAP Concur to track your employee expenses. The whole expense record-keeping and data verification, payments, tallying numbers, and more will all be done on the software, and you will not have to sweat over manually conducting these processes.
Want to integrate a software option to manage expenses? Confused about which is the best suited for your business in your particular industry? We can help you with that decision as well as the integration process. We also provide customized solutions to all of your software needs. Get in touch with our team to get started on this journey.
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