I know one of my least favorite activities used to be keeping track of expenses. All that math and stress of finding out where my money went… It sounds scary but it doesn’t have to be that way.
What if I told you that using an expense tracker will benefit you in the long run, especially around tax season?
Skeptical? Read on to see what I’m talking about.
Develop Good Record-Keeping Skills
The more you keep track of receipts and other important documents, the better handle you have of expenses. You can see where your money is going and how it’s being spent.
Having good record-keeping skills is beneficial because you have control of what’s going into your business and what’s coming out of it with documentation to show it.
Benefit at Tax Season
The one time of year that’s everyone’s least favorite is tax season.
Using an expense tracker will have you prepared by not paying taxes you don’t actually owe.
You can also get the most deductions by keeping track, therefore, lowering your taxable income. What could be better than that?
If you’re unsure of what counts as a “business expense”, here’s a short list to help.
Overlooked Business Expenses
While this can technically be filed under the “travel” category, you can deduct certain things relating to your car.
Gasoline is one of them but be careful. You can only choose to deduct gas or mileage.
Those shiny new pens you bought? Deductible. How about that new computer? Also deductible. They can even be deductible if you use them in your own home office (as long as you use it for business purposes).
If you traveled to a business conference and stayed at a hotel, that can all be deducted. Airfare is included as well.
Brushing up on much-needed skills related to your field is important. And while it’s not always fun to study, it’s nice when it’s categorized as a business expense.
Did you buy a new machine or necessary equipment? It qualifies as “tangible personal property.” Hello deduction!
When a company donates to a local or big name charity, it benefits everyone involved. You can deduct contributions made to an organization.
All those Facebook ads that took big bucks to run can be deducted. If it’s related to business activities and nothing else, it qualifies.
Now back to the top ten benefits of using an expense tracker.
Know Employee Spending Habits
If you have employees or are thinking of hiring, that’s more people that are dipping into bank accounts. Paychecks come out every month and when you can’t be everywhere at once, you send them to run errands.
When you use an expense tracker for employees, every penny is accounted for. This gives you peace of mind when you send someone out for a coffee run with the business credit card or to mail out orders.
Understand Your Business Inside and Out
No one knows your business better than you. With an expense tracker, you’ll learn if the amount you spend on monthly bills is normal or if you can cut back somewhere.
When you’re aware of spending habits, you can prepare for the future. This way you know where your money is going and how it’s being spent.
Create a Reasonable Budget
Now it’s time to analyze your spending habits. This allows you to create budgets based on your needs.
You know which category is taking the most money and which could use a little more cash flow. It helps to know if you’re overspending or if the expenses are building up rapidly over time.
Don’t live above your means by spending carelessly.
Meet Your Goals
Let’s say you want to move into a new office with the bigger square footage. How can that be achieved?
Use the reports that come with an expense tracker to see what can be cut back to save extra cash. Put it away each month and watch it build up over time.
Cut Down on Mindless Spending
When you use an expense tracker, you really get to see where the money’s going. You’d be surprised how much that cup of coffee every day adds up at the end of each month. Do you really need one every day?
By limiting what you spend daily, weekly or monthly, you’ll be able to hold on to more dollars. Put that towards bonuses for employees or a new computer.
You’ll Be Aware of Hidden Fees and Fraud
Ever look at a bill and wondered where that charge came from? When you keep an eye on expenses, you can catch those hidden fees some companies may not disclose.
It can even catch fraudulent charges you’re unaware of. Banks won’t report on charges they deem suspicious unless they’re over a certain amount.
It Creates a Safety Net
Things happen. Expenses pop out of nowhere and equipment break down unexpectedly. When that does happen, you’ll be prepared because you were able to set aside some extra cash thanks to your expense tracker.
Knowing you have that cushion will allow you to breathe more easily. Now, you can focus on the most important aspects of your business.
You’ll Stop Stressing
The days of worrying if you’ll have enough to pay a bill or an employee are over. When you use an expense tracker, you see where your money is going allowing you to budget smartly.
You’ll have peace of mind knowing you can make due dates for bills and paydays for employees. You calculated what everything adds up to at the end of the month, therefore, you can run your business smoothly.
Top Expense Tracker Apps
Now that you know how beneficial using an expense tracker is, it’s time to choose one based on your type of business. There are ones specifically for travel or if you have a multitude of employees.
Here are the top five.
Paperless is the best way to go, right?
Foreceipt makes it easy in three steps. Take a picture using your smartphone, enter the amount and merchant, hit save and it’s uploaded! You can now keep all your receipts on hand, digitally.
This one is great if you travel a lot for business. Expensify is a free app that allows you to keep a log of expenses, mileage and time.
It can also sync with your credit cards to automatically draw in charges.
Shoeboxed is great if you need to add receipts on the go. Take a picture of one and it extracts the merchant, amount, payment method and date.
It can track mileage and create expense reports all from your phone!
If you own a business with multiple employees, Certify makes it easy to keep track of all their spending habits.
It can automatically generate reports and gives you a suite full of insights to determine patterns, preferred vendors and average spending across the country or department.
Aimed at small businesses with employees that travel often, Concur manages and tracks expenses and receipts. You can even book flights and find hotel rooms.
If things change, you can cancel or rearrange reservations.
To make sure you make the most of your expense tracker, here are some more tips to keep in mind.
Keep Business Accounts Separate From Personal Accounts
Not only will this be important come tax time, but it’s easier to recognize business-related purchases. If you use an item for personal purposes, you can’t claim it as a deductible for business expenses.
Use a Calendar for Reoccurring Payments
Whether it’s an actual calendar or an online one, mark down every due date that repeats itself weekly, monthly or yearly. This way, you won’t be caught off guard when the payment comes out.
Save Paper Receipts
Even though everything is digital now, unfortunate things happen. Computers stop working and phones get destroyed. If that does happen, you’ll have backups for all those scanned receipts.
Know What’s Deductible
While this was explained a little throughout this post, I want to touch up on it. It’s important to check with either the IRS itself or an accountant to know what qualifies as a business expense.
Whether you’re a freelancer or full-time business owner, there are different things that qualify as a deductible.
Using an expense tracker is obviously the best way to know where your money is going. But, if you don’t have the time to do it yourself or with the help of an app, you can always outsource it to a bookkeeper.
Knowing how to budget and manage your money will help in the long run. Not only does it grow your business quicker, it leads it to success.