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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.
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.
1. Separate personal and business expenses
Keeping your business and personal finances separate is a basic best practice for small business expense tracking. Make sure you have a business-only bank account and business-only credit card. It might sound obvious, but don’t use personal funds for business expenses. Even if you reimburse yourself or your employees, mixing personal and business funds add 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.
You can 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. Or 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.
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.
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.
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.
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.
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.
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