You are a business owner and you have to answer to no one, it’s freedom like no other! But be careful, spending funds on business expenses and not tracking them can cost you more than you think.
By: Tatiana Cortes
You will have to deal with unnecessary issues if you’re not adequately tracking your business finances. So, if you’re not doing it already you need to start tracking your business expenses, like right now! This will help you to better manage your business finances, prepare for tax season (and get your money back), and to maintain a profitable business. Here are some tips you can use to track your business expenses better:
Open a separate business account:
Whether you’re a freelancer or an entrepreneur, having a separate account for your business is vital. This will help you track what goes into and out of your business efficiently. Use your business account explicitly for business, so it won’t be difficult to separate personal and business costs if you’re investigated by the IRS.
Learn what you can deduct:
It's very important to identify which expenses in your business you can deduct on your taxes. Then flag them for easy lookup when it comes time to complete your tax return. It’s also essential to know what falls under the deduction policies, for instance when is lunch considered a “business meal?” if you’re meeting with a client to discuss business topics, then this is considered business-related entertainment. Also, if you’re using your vehicle for business purposes, then your need to track the mileage and gas expenses for each business trip you make – don’t sweat it, there’s an app for that.
Don’t throw away receipts:
Best way to prove your business expenses is through receipts. This shows that the money you spent was on the cost you claim on your tax return. Plus, it’ll help you calculate your business expenses to ensure they’re accurate. There are apps to store your receipts by taking a picture of it with your phone and uploading it.
Choose a bookkeeping system:
Bookkeeping is the process of recording and organizing your financial transactions – making sure your records are accurate and up to date. It’s important to recognize that bookkeeping and accounting are different. Accounting involves similar tasks but has more to do with analyzing business finances and strategic planning than handling expense reports. There are a variety of platforms available that track expenses easier, faster and better. The bookkeeping software can be synced with your business account and credit card, so transactions are added automatically and take care of multiple jobs: receipt tracking, custom reporting and more.
Stay on top of transaction record (including cash transactions):
Don’t wait until you have a pile of receipts to try and organize and record them. The best time to do this is at the point of sale. You will also have to pay closer attention to when cash purchases occur so you can accurately record them. If you are using financial software, you can create cash accounts to monitor every dime you spend.
if you have a business credit card, use it! This will help you keep better track of all your expenses. Not only does it record each transaction in real-time, but it also gives great insights. For example, you can see monthly, quarterly, and annual spending broken down by categories.
Use business credit cards whenever possible:
If you have a business credit card, use it! This will help you keep better track of all your expenses. Not only does it record each transaction in real time, but it also gives great insights. For example, you can see monthly, quarterly, and annual spending broken down by categories.
Its time to get organized and start tracking your business expenses!