If you’re a small business owner and not accountant, you probably didn’t start your company out of a passion for bookkeeping. But as you grow, managing your finances becomes a more and more important task.
For many, it’s an unfortunate truth. We all know that running even a small company takes long hours and much work. And this often means tasks like tracking expenses can easily fall by the wayside. But this critical job plays a crucial part in controlling your cash flow.
If you don’t keep tabs on how much money is going out, you can quickly find yourself in a difficult situation. Keeping an eye on your expenses will help you now, but it can also provide some extra deductions when the tax time comes.
How can you track all your costs smartly? Use these 6 tips:
- Keep business and personal costs separate. One of the biggest mistakes some business owners make is mixing their own and company expenses. Not only is this difficult to track, but it can also be problematic in the event of a tax audit. Always use dedicated bank accounts to pay your bills and carry two different credit cards – one used for personal purchases and the second for your business shopping.
- You must know what can be qualified as a business cost. IRS clarified, that a business expense is one that’s both ordinary and necessary. So, how about taking your customers for lunch? That will likely qualify as a business expense. Are you taking your client out to a baseball game afterward? No, new changes in the tax law have made most entertainment expenses no longer deductible.
- Register all expenses immediately. We’ve all gone through a credit card statement and found purchases we didn’t remember making. For this reason, it’s essential to record your purchases as soon as you spent money. Taking this approach will help reduce the risk of an accounting error. And there are plenty of technologies that make it quick and easy.
- Organize your records. It’s time to ditch that shoebox full of crumpled receipts. Instead, keep all your receipts in folders organized by month. Or even better, take a picture on your phone to store the images in the cloud. For monthly payments like utilities, create a reminder on your phone.
- Review your spendings regularly. Now that you’re tracking expenses be sure to take a routine look at where your money’s going. Check your books every week to be sure that the costs are in good standing. This will help lower the risk of bounced checks or unpaid invoices. Then, at least once a quarter, look at your spending trends. This can help you identify areas where cuts can be made.
- Use technology. Keeping a written log or updating an endless spreadsheet can be difficult and error-prone. Good for you, there are plenty of mobile apps and online tools that can do the job for you. If you’re already use accounting software, significant players like Concur and QuickBooks may be the right thing. But there are many other very good options to use. Some other popular apps include Zoho Expense, Expensify, Rydoo, and Shoeboxed.
As a small business owner, you’ve got a lot on your plate. So when it comes to protecting everything you’ve built, you need someone you can count on.