Did you know that expense tracking is one of the most important things you should be doing as a small business?
As a small business owner, the success of your venture wholly depends on your budget, so, therefore, considering you usually have a constrained budget, to begin with, every single penny that you spend matters and should be accounted for.
Now, that may sound like an easy thing to incorporate into your routine, but it isn’t.
Some business owners fail to track their business expenses regularly. This leads to a lot of chaos when it gets to the tax office or when you realize that you have exceeded your set budget by far.
So, expense tracking is important, But why?
To find out, keep reading!
Why is Expense Tracking Important?
There are many reasons why you should be tracking your business expenses regularly.
- It helps you improve your finance and money management.
- It helps you deal with the tax season better.
- It helps you improve employee satisfaction.
- It helps you gauge the overall success of your business.
Let’s explain further…
It helps you improve your finance and money management.
As mentioned in the introduction, small businesses need to be wise during expenses. Waste of money is one of the most common reasons behind failing businesses.
A business owner’s most important task, in that regard, is to ensure that their money is not going down the drain.
Well, that’s what regular expense tracking will help you achieve! When you are constantly in the loop with how much money you are spending, it’s easier to manage your cash flow and ensure you don’t exceed your budget.
Tracking your expenses will also help you delegate money across all the areas of your business more effectively.
For example, if you notice you are spending some unnecessary money on the HR department, you can make active changes to save money and spend it on the marketing department instead! Get the picture?
It helps you deal with the tax season better.
Let’s be real – filing taxes is not something any of us look forward to, and rightfully so! Something about piles and piles upon documents has a way to instill a sense of dread in even the best of us.
However, what if there is a way to save yourself from the tax period trouble? Yes, you heard that right! Constantly tracking your expenses can help you avoid later chaos when tax season rolls around.
This is mainly because tracking your expenses will help keep a meticulous record of your spending.
But guess what the best part is?
There are many expenses you make that are tax-deductible. So, business lunches, meetings, cell phone costs, office supplies such as stationary, rent expenses, and home-office expenses are tax-deductible and you can get all the money spent on these right back into your wallet.
So, if you want your money back, track your expenses regularly.
It helps you improve employee satisfaction.
Who would have thought, right? But regular expense tracking can also help you keep your employees happy.
You must remember that your employees spend money on business responsibilities out of their own pockets. Too much of this or ineffective handling of this on your end can lead to frustrated employees.
Solution? You must have an efficient cash flow system where your employees are reimbursed for the money they spend on your business. Having an expenses tracking system can make this a success.
Result? Happy employees!
It helps you gauge the overall success of your business.
Your business profitability is perhaps the most relevant metric to identifying how well it has been doing. Calculating is very simple: you take your revenue and subtract your expenses from this number.
Although this seems like a painfully obvious thing – it is not. Many businesses struggle to get a profitability report, and guess why? Well, it’s because they have no idea how much money they have spent.
It is inarguably important for small business owners to keep track of their expenses and ensure they keep records.
How to Track Expenses Regularly
We know how important it is to track your expenses, and why, but how can you, as a small business owner, track expenses regularly? Here are a few ways:
- Digitize all your receipts using invoicing software small businesses use
- With the use of a Ledger, you can never be limited on information on all your transactions and expenses
- Use software for expense tracking to categorize your expenses
- Have a separate bank account for your business
- Connect your bank to an app for expense tracking
- Review your report daily, and if not daily, then at least weekly
So, this is how you can manage your expenses regularly. However, instead of getting a separate app for expense tracking, invoicing, and accounting – why not get Vencru?
For more information on why having an accounting report is important, read this short and informative blog post
Vencru is not only software for expense tracking but also helps you with many other aspects of your business, including accounting, employee management, client relationship management, and inventory handling.