Most people today understand the importance of tracking their business expenses at a personal level. However, when it comes to their businesses they often lose track of their expenditure. Tracking expenses is one of the most important aspects of running a business and should never be overlooked. Many people put off tracking their expenses because they feel that it would be adding on to their already full plates.
Regardless of how you want to handle this exercise, below are a few reasons to start tracking your money.
1. Financial awareness
Do you know where your money goes every month? Is your business as healthy as you might think? These are some questions that you might not have answers to if you do not track your expenses. Tracking expenses, even the smallest daily expenses, will warn you of serious spending issues before you blow your budget. By understanding your spending habits you can make necessary changes to better manage money within your business. With this information, you are equipped to make better decisions which save money that could be invested elsewhere.
2. You are better prepared for the tax season
Tracking expenses can come in handy during the least favorite time of the year: tax season. It helps you keep better records which in turn helps the proper filing of business tax returns. The easiest way to reduce the amount of tax you pay is by deducting valid business expenses. How can you do this if you are not aware of the expenses and do not have proof of where the money has gone? It is therefore wise to keep track of business expenses and keep recording them as they occur. By doing so you will not forget them when preparing tax returns.
3. Easy determination of how profitable the business is
Business expenses directly affect how much profit the business makes. When expenses are high profits will definitely be low and vice versa. If you do not keep track of your expenses, you can not be sure what percentage of the revenue goes to paying expenses. Given the fact that business expenses eat directly into the business profits, staying on top of the going out cannot be stressed enough. Many business owners are not able to give the exact figure of their profit simply because they have no idea how much their expenses are. This could lead to over or underestimating the amount of profit the business brings in.
4. Keep stakeholders happy
Your business has many stakeholders including employees, suppliers, creditors, and even the government. Your employees will send receipts for their business travel expenses. Unless you stay on top of your expenses, you will not be in a position to reimburse them on time or in full. This alone can kill employees’ morale which negatively affects your business. By tracking your business expenses you are in a position to come up with a cash flow management plan that can enable you to pay your suppliers and creditors on time, keeping them happy.
With all the benefits of tracking expenses, you can not afford to overlook your cash flow. However, if you do not have the time to track expenses, consider having a smart software handle it for you.
- License: Image author owned
- License: Image author owned
Guest Post Courtesy of David Brown. David Brown is a geek at heart. He’s worked and consulted on some major online projects over the years. David has a passion for helping people learn the benefits of steam lining their business through computer technology, thereby saving them time and money. His expertise in the computer world has helped companies time and time again, manage their businesses, employees, and clientele more efficiently.