How to Best Keep Track of Business Spending

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Do you need help keeping track of your business spending? You may need to be made aware of the business's accurate financial picture and also be heading toward non-compliance, which can eventually result in more financial stress and losses. While getting so involved in the business's daily tasks and activities is common that you lose track of business expenses, this aspect must not be overlooked. Keeping track of the business expenses is essential to streamline your finances, monitor your cash flow and record your income.

If you, too, are trying to learn how to keep track of business spending, read this article for some helpful tips and suggestions.

 

How to Keep Track of Business Spending

Multiple business aspects are dependent on how well you track your expenses. For instance, it allows better control over cash flows, makes it easier to organize finances and manage taxes, prevents you from overspending, and may also help in reducing debt, eventually leading the business to achieve its goals. Here is a small guide to steer you in the right direction.

 

Open a Separate Business Account

Many new or small business owners make the mistake of not drawing a boundary between their personal and business expenses. This makes it difficult to track the expenses incurred specifically for the business. Therefore, the first thing you must do is to have a separate account for your business. The bank statement will give you a clear picture of how much you spent or earned in a certain duration. This will also help you categorize and organize your expenses and ensure that you are legally compliant, as you can quickly provide proof of business purchases and better manage your taxes.

 

Set Up an Accounting System

Businesses can establish either a cash or an accrual accounting system. While a cash accounting system only recognizes a transaction when there is a cash exchange, an accrual system records expenses and income as they occur. Depending on the nature of your business and preference, you must choose which reporting method to opt for. 

 

Automate Your Records

Organizing business expense documents can be taxing and time-consuming. Instead, you can go digital and easily record and keep track of your transactions. Dedicated accounting software can store business receipts and relevant documents like tax records.

Similarly, if you want to categorize your expenses according to respective business functions, you can also do that. For instance, a project expense tracking software can monitor the expenses incurred for procuring resources and materials for a specific project. This saves time and places all your receipts and expense records in one place.

 

Connect the Accounting Software to Your Bank

The next consideration is to link the accounting software with your financial institution. This will make categorizing all business expenses easier and automatically download your bank transactions. You can also compare your transactions with the bank statements to reconcile the records and ensure no loopholes exist.

Moreover, linking your bank account with the accounting system will allow you to conduct banking transactions on the software without logging into the bank account. This reduces the time required to track business spending and provides an accurate record of income and expenses since no transactions may be missed, which may happen if you do this manually.

 

Organize Business Receipts and Review Expenses

It is vital to maintain proper records of business receipts for tax purposes. You can organize and document your receipts in paper or digital methods as per your preference. However, digital records reduce physical storage requirements. Moreover, with digital records, the receipts can be synced with the account books, making it easy to track individual transactions.

Once you have ensured that all the expenses are accounted for, review them for assessment and audit purposes. Once you have accurately documented and categorized your expenses, you can strategize and decide how to improve your operational efficiency and cut costs where possible.

 

Final Thoughts

Staying on top of your business's financial aspects and tracking your expenses gives you a clear insight into the business's financial health. It can help you identify loopholes and weaker areas with a margin for improvement.

Thanks to digital expense trackers and accounting software, you can easily monitor and manage the financial aspects of your business. A job that may otherwise take a long time can now be done in minutes and will not take away from the important time you can otherwise spend doing productive tasks or activities.

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