Whether you’re a small business owner, understanding the cost of doing business is crucial in making informed decisions about how to invest money and time. Tracking your small business expenses can help you make better decisions on where to allocate your resources. With the right strategies, you can help grow your business with less risk while knowing exactly where all of that money is going, stay within budget, and make projections about future income.
There are many different ways to track your expenses for your small business, but we’re going to discuss 4 different methods that work best if you have less than 20 employees.
Create a Spreadsheet To Track Your Expenditures
Tracking your expenses is a great way to know where you stand financially. It’s also important from the standpoint of understanding what business costs are involved in running your operation so that you can make decisions about pricing and resources accordingly. One of the first steps for doing this is creating a spreadsheet to track your expenses. Categorize your expenses based on the time period they cover. For example, you might have one sheet for monthly expenditures and another sheet that covers weekly costs.
As an added benefit, this helps create a visual of how your business is doing at any given point in time by looking at trends across different expense categories over several months or weeks. Your spreadsheet should include the following columns:
- The name of the business expense (such as “Rent”)
- The date on which it occurred
- What the value was for that particular transaction (for example, $500)
- How much you paid in total over a designated time period. For instance, you might have one column for business-related payments like employee salaries and miscellaneous payments.
Keeping these records will make it easier when filing taxes or even reporting the annual 1099-MISC tax form for non-employee payments to the Internal Revenue Service (IRS) as noted. You can also use apps like Mint or Expensify to automatically categorize and track your expenses instead of doing it manually.
Keep All Of Your Financial Information in One Place
As a small business owner, you must keep all of your financial information in one place. This will simplify filing taxes and help with any questions from employees or clients about how much money was spent on various projects. It also makes budgeting for the next year easy because everything is stored in one central location and can be easily downloaded or exported into spreadsheet format.
One option is to use a Google Drive spreadsheet, which can be accessed from anywhere with an internet connection and saved in the cloud for convenience. Another great free option is Wave Accounting, which has basic bookkeeping tools as well as budgeting capabilities, so you’ll know how much money your business should have at the end of the year. There are also paid software solutions like QuickBooks, which can help you track expenses and generate reports for the CPA when it’s time to file your taxes.
Set Up Automatic Payments for Monthly Bills
To ensure you’re paying bills on time, every time, set up automatic payments for all your monthly bills. That way, you won’t have to worry about forgetting when a bill’s due date is or having late fees tacked on because of it. You can set this up with most utility companies and credit card issuers (and even some banks). Once everything’s set up, check-in every now and then to make sure the payment dates haven’t changed. Keep an eye out for when your usage changes, too. It’s easy to forget how much you’ve used until you get a bill.
Review Your Budget Regularly
Regularly check your budget to identify any expenditures that are outside of what you anticipated for a given month or year. Then, if necessary, find ways to cut back on expenses and reallocate funds where it makes sense. In addition to the budget, you should also review your finances regularly. This way, you can evaluate different ideas for reinvesting money in our businesses and improving processes. Balancing these expenditures with existing ones is important so that you don’t get yourself into financial trouble or drain your savings account too quickly.
Tracking Expenses Helps Your Business Thrive
In conclusion, tracking your small business expenses helps you to reduce costs and make more profit. It can also help you determine which products or services are generating sales, so you can focus on increasing the demand for them in the future. Ultimately, the goal is to help your business grow and thrive.