Starting A Business Series: How to Track Your Business Expenses Like a Pro
It’s unlikely that the answer to “what excites you about your business” is tracking expenses. And that is okay. But by putting off your business expenses, you will add more work to your already busy schedule in order to properly document everything.
Come tax time, for example, instead of simply handing over all of your documents to your accountant, you may be rummaging through a backpack or flipping though unlabeled files to get some much-needed deductions on your tax bill.
By regularly tracking expenses you will be more on top of the day to day costs, better prepared come tax time, and can gain control of your financial management.
Tracking your expenses doesn’t have to cause a headache, not when there are simple systems to help you stay organized and on track. Today, we want to walk you through a few simple steps to better track your business expenses.
Create business accounts
You are a business owner now, it’s time that you stop squeezing business purchases onto your personal credit card. Separating personal and business expenses is a great way to protect your own assets, stay organized, and have a better understanding of your business’s profits.
Drawing a clear line between business and personal purchases can help you figure out how much money your business spent in a given period of time. Start by opening a business checking account and getting a business credit card. Then any business expenses would be associated with that fund. This will make tax time a breeze, as you won’t have any confusion over business or personal expenses.
By having a business bank account, you will also build up your business’s credit which could be beneficial should you need any financing down the line.
Save your receipts...all of them
Receipts are an important part of tracking your expenses. Staying on top of your receipts will be especially important when you are looking to deduct expenses on your taxes. There are so many deductions available for business owners like:
Office supplies (pens, stationery, a monitor, laptop)
Business meals and meetings
Travel (airfare, train, fuel)
Home office (additional write-offs on utilities, maintenance, and other expenses)
In order to qualify for any of those deductions though, you need to maintain pristine records that clearly document these as business expenses.
You will also need a system for organizing your receipts. Remember, the IRS makes business owners keep receipts for 3 years so you will need a good place to store them in case of an audit.
This can be in monthly folders, binders, or online tracking systems so long as they are clearly marked and their purpose is explicitly stated. That $25 Panera lunch from the bottom of your shoebox won’t mean much unless you also say what that expense was for like “client lunch” or “prospect meeting.”
Find the right software
There are so many great digital accounting software options for business owners. Shop around and look for one that can streamline multiple processes like track expenses, create P&L statements, calculate monthly expenses, and manage invoices.
Don’t put it off
Easier said than done, we know, but prioritizing your business expenses will improve flow and organization. Try to track expenses as they come up. If you can’t do it daily, commit to once per week where you label, file, and store recipes as well as check-in on other business charges.
Profitability is the name of the game in business and tracking your expenses is a big part of that. Our team would love to help you find a system that works best for you to keep your business running as smoothly as possible. Give us a call today.
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