Regardless of if you’re a new business owner or have a lot of experience, keeping track of all the company’s expenses is very important. Aside from having bills to pay, you’ll also have to make several important payments during tax time. While it’s not something anyone looks forward to, paying for business expenses has to be done.
If you’re a newcomer especially, it’s particularly important you keep this in mind. In fact, it should be one of the first thing you think about when running your business. Every company has a budget, after all.
With that said, why is keeping track of your business expenses important, and what are some useful tips for doing so? First of all, let’s look at the former:
While there are multiple reasons you should keep track of your business expenses, there are a few that hold a bit more weight than others when it comes to navigating your finances.
Here are some of the most important reasons to track your business expenses:
Taxes are one of the most important reasons you should keep track of your business expenses. According to the IRS, the average taxpayer spends 13 hours preparing their return. First of all, there’s no doubt that some businesses have a lot of paperwork to organize, and this includes record keeping, tax planning, form submission, and other related activities.
However, imagine how much time would be saved if businesses not only kept track of their expenses, but were preparing their records all throughout the year? No one would be scrambling at the last minute to organize all their files.
Overall, keeping track of your expenses is important, because you know exactly what needs to be submitted during tax time.
Tracking your business expenses is more helpful than just calculating your taxes, it can also provide important insight into your business’s financial health. Tracking your expenses is required to calculate your profits and losses.
If you keep categorized records, you can also see exactly where and why you’re spending. You can locate places in your business where you need to cut expenses or areas where your business is generating a higher profit thanks to lower expenses.
Knowing your expenses along with your profits can help your predict and prevent moments of financial risk or seasons of slow growth.
Being organized aside, keeping track of your expenses is also an exercise in self-discipline. By knowing what you need to prepare ahead of time, you’re setting an example for others in the workplace, of how to take your expenses seriously. Not to mention that no employee wants a business leader who is disorganized.
Besides, if your employees are new and don’t have much experience with taxes, why not give them a few pointers? Show them the importance of tracking all business expenses.
As small business owners, we don’t necessarily have much time to dedicate to our finances – but, until you’re ready to outsource your accounting, you will need to set aside some time each week to categorize and input your weekly transactions.
Luckily, there are many accounting softwares and programs that can help you automate tracking your business expenses.
Let’s take a look at some of the ways that you can track your business expenses:
Closest to the old-school method of keeping paper receipts, you will need to create dedicate folders to your expenses. Scan and upload important documents to ensure they don’t fade or get lost over time.
You should keep all receipts, invoices, records, and documents relating to your business expense.
Thanks to the internet, we now have access to many programs that allow you to upload, categorize, and sort your expenses and documents. Try a few and find one that works best for you. If you like the software and find it easy to use, you will be more likely to use it over time.
As another tip, you should also hire a tax professional to help with your expenses. Even if you think you can handle it on your own, hiring one is always a good idea for sure. Aside from giving you useful advice, they can also show you how to improve even if you’re doing well.
For example, even if you’re planning ahead, they might show you how to plan even further. Whether you want to know its importance or are looking for some useful strategies, these are some helpful tips for keeping track of your business expenses.
For more information about the importance of keeping track of your business expenses in the workplace, especially when it comes to dealing with taxes, feel free to contact me today at MOD Ventures.