As a business owner, tracking expenses is essential for the success of your business. Not only does it help you manage your finances, but it also helps you make informed decisions about your business. However, tracking business expenses can be a daunting task, especially if you’re new to running a business. Let’s explore some tips on how to track business expenses effectively.
- Create a system
The first step in tracking business expenses is to create a system. This system should include how you’ll record expenses, how often you’ll do it, and where you’ll keep the records. One popular way of doing this is by using a spreadsheet. You can create columns for the date, expense category, amount, and any other relevant information. Another option is to use expense tracking software, which can automate the process and make it easier to manage your records.
- Separate business and personal expenses
One common mistake that many business owners make is mixing personal and business expenses. This can make it difficult to track expenses accurately and may even cause problems when it comes to tax time. To avoid this, it’s important to separate your personal and business expenses. You can do this by opening a separate bank account for your business, using a separate credit card, or using cash only for business expenses.
- Keep receipts and invoices
Keeping receipts and invoices is crucial when tracking expenses. They serve as proof of the expense and can help you claim deductions when filing taxes. It’s a good idea to keep both paper and electronic copies of receipts and invoices. You can use a scanner or a smartphone app to take a picture of your receipts and save them in a designated folder on your computer or cloud storage.
- Categorize expenses
Categorizing expenses can help you analyze your spending and make informed decisions about your business. Some common categories include office supplies, travel expenses, rent, utilities, and advertising. By categorizing expenses, you can identify areas where you’re overspending or underspending and make adjustments accordingly.
- Review and reconcile regularly
Reviewing and reconciling your expenses regularly is essential to ensure accuracy and catch any errors or discrepancies. This involves comparing your records to your bank and credit card statements to make sure they match up. By doing this regularly, you can identify any issues and resolve them before they become a bigger problem.
Tracking Expenses is Key for Business Success
Tracking business expenses is crucial for the success of your business. By creating a system, separating personal and business expenses, keeping receipts and invoices, categorizing expenses, and reviewing and reconciling regularly, you can effectively track your expenses and make informed decisions about your business. MKS&H can help you track expenses and ensure that all aspects of your business accounting are done correctly. Contact us today to learn more!
About MKS&H: McLean, Koehler, Sparks & Hammond (MKS&H) is a professional service firm with offices in Hunt Valley and Frederick. MKS&H helps owners and organizational leaders become more successful by putting complex financial data into truly meaningful context. But deeper than dollars and data, our focus is on developing an understanding of you, your culture and your business goals. This approach enables our clients to achieve their greatest potential.