There’s never been a better time to open a small business but if you’ve never run a business before, keeping track of your business expenses can be one of the more difficult things to fully grasp. It’s not quite as simple as just your incomings and your outgoings, there are lots of intricacies to keep on top of and if you manage to lose track of just one of them, everything can and will fall apart.
If you are aware of exactly what and how your business and making and losing it will not only mean better placed to make financially sound decisions but it will make paying your taxes significantly easier too. With that in mind, here are some of our top practical tips for managing your business expenses.
Open a business account
Even with the smallest business, it makes sense to sever the financial line between business and personal finances. For tax purposes alone it creates a minefield of confusion. That’s why you should always open a business account.
This will also incentivise you to use more business credit cards, which will often have great rewards associated with them. It might also mean you use less cash and using cash for business expenses is never a good idea as it’s impossible to reliably track and trace.
Keep all receipts
Thankfully, the vast majority of invoices and receipts are digital these days and there are dozens of apps and software programmes dedicated to keeping track of this valuable data. For those rare paper receipts, meanwhile, you’ll want to keep a dedicated folder or draw aside for them.
You should also make a note on the back of each receipt what the purpose of the purchase was as it can be difficult to recall when there are hundreds of the things to sort through come tax day.
Choose the right software
Realistically, 90% of small businesses would benefit from cloud-based accounting software. It is possible to keep track of all of your expenses in an Excel spreadsheet but it’s a very limited option that involves having to manually keep track of every expense. It’s a tedious process that isn’t practical or necessary anymore.
Modern accounting software can track all expenses on either desktop or mobile apps and sync all information remotely into the cloud. It also connects directly to your business account so all digital transactions will automatically be logged and sorted.
There are hundreds of other little time-saving things built into most software that we don’t have e the time or space to go into here. But trust us, once you’ve automated expense tracking and effectively removed one of the most time-consuming and monotonous parts of your business, you’ll never want to go back to the dark days of Excel.