With cutting edge competition in all industries, it has become vital for businesses to track and manage their expenses in order to pinpoint any unnecessary expenditure and to cut costs. Proper management also helps a lot when the time comes to pay taxes. As an entrepreneur, you can maintain a number of practices to keep your business’s finances sound.
The following guidelines will help you to track and manage all the expenses of your business. You should try to aim for implementing as many of these tips as you can.
There are several powerful accounting software tools out there that can help you automate the process of financial bookkeeping. QuickBooks, for example, is renowned for simplifying the process of tracking and managing small business expenses. It is best to use the same version as your accountant because this will make it easy to import information to your tax return when the need arises.
Get Ready for Tax Time
Make sure your records are as accurate as possible, and don’t forget to record any expenses that you are planning to deduct on your taxes. These may include expenses involving travel, entertainment, use of business vehicles, office equipment as well as charitable contributions.
Don’t Mix Personal and Business Funds
Try not to use your personal cash, credit cards or checking accounts for any business expenses. Even though you can later reimburse yourself for any such expenses, these generally add unnecessary complexity to your financial records and may even expose your business to scrutiny by IRS.
Keep an Eye on Petty Cash
Petty cash expenditures, if not tracked properly, can create lots of problems for you. Use your accounting software to create a cash account so that you can adequately manage your expenses and cash flow in and out of the account. It is best to minimize the use of petty cash until absolutely necessary.
Save All Receipts
In order to document tax-deductible expenses, you will need all your receipts if you are audited. It’s a good idea to jot down why you carried out the transaction on the receipt for future reference. Consider scanning all your receipts to file them digitally; doing this will not only save on a lot of physical storage, it will also cut down on the hassle of managing all the extra paperwork.
Your accounting software may allow you to upload your receipts with the expense. QuickBooks Online, FreshBooks, Xero and Wave are software programs that allow receipt management.
If you don’t put your expenses into your accounting software on a timely basis, you will end up with a large pile of receipts that will only continue to grow. By recording the expenses in a timely manner, you will be keeping your financial records up-to-date.
Technology has made things extremely easy. For instance, you can use the QuickBooks mobile app to keep track of your expenses on the go. You can easily integrate and synchronize data between QuickBooks on your PC and on your mobile.
Monitor Results Frequently
Using QuickBooks, you can easily create weekly or monthly reports to review how your expenses are coming along and to see how well you have been managing your business cash flow. Make sure you keep an eye on your budget by reviewing financial reports on a regular basis.
These simple tips will help you get started with good bookkeeping habits, which in turn, results in maximizing your expense deductions and minimizing confusion tax time.
Note: Also check out our article on Keep a Leash on Business Expenses.