How to Keep Track of Business Expenses: 4 Simple Steps to Follow

What Are Business Expenses?

Any costs incurred for business purposes such as employee salaries, office rent, software utilization, and consultant fees are business expenses. To keep it simple, these are business deductions that have to be cut off from your overall income.

Generally, businesses closely monitor where exactly the money goes so that it would be easier to do financial planning. This process is mainly followed by businesses to collect documentary proof that further allows the IRS to lower their taxable income. In short, it is recurring costs that you might spend on production or other business supplies on a daily basis.

How to Keep Track of Business Expenses?

Keeping a track of business expenses takes a lot of time, if done by flipping papers. But, not with automated process where you can keep a record of expense receipts as soon as you issue them. Below are steps you must follow to track business expenses.

1. Get a Bank Account for Your Business

Business owners will need a separate account for performing business transactions only. It will make the entire tracking process easier and can be used to reduce an organization’s taxable business income. Get your Employment Identification Number (EIN) of your business to create a new account for merchant services. If you are a sole proprietor, bank may ask you for a Social Security Number (SSN).

Moreover, opening a bank account won’t be enough as you will need a dedicated credit card. The reason is to make online transactions and easy accessibility of credit/debit history. Having a credit card can also be used to receive business finances like cashback and rewards.

2. Integrate Your Bank Account with Software

Once your bank account is operational, connect it to accounting software or invoicing software to retrieve data automatically at the time of generating reports. Since this is a simplified way of keeping track of business records, integrating your account with invoicing software is essential.

The software can further assist you in categorizing the expenses, making your tracking process much easier. Such expense tracking solutions are the reason why businesses spend less time on expense tracking. Software integration with a business bank account will help you retrieve accurate transaction details, leaving no chance of human error.

3. Generate & Manage Receipts

Next, start creating and managing digital receipts using reliable software like Moon Invoice. It minimizes your receipt generation process in such a way that you don’t require pen and paper. You neither need to print hard copies of receipts nor have any fear of misplacing them. The software keeps your generated receipts easily accessible in the cloud environment.

So, you won’t need to search for receipts manually when you need them the most. With software, you can issue a receipt soon after receiving the payment from clients and it will automatically get saved. Eventually helping businesses save time and effort in tracking expenses.

4. Track Expenses Using Software

Be it enterprise-level or small business expense tracking, Business expense tracker software like Moon Invoice offers accurate expense reports. Whenever the need arises, just utilize this tool and generate reports without wasting a minute. You will require less effort in creating them because it eliminates the need to collect papers from different corners of your office. This automated process is ideal for business owners who often find themselves traveling.

Here’s how to get an expense report on Moon Invoice:

1. Login to Moon Invoice
2. Then, choose ‘Purchases’ from the main menu and click on ‘Expenses’
3. Start creating expenses by filling the necessary information
4. Whenever you want to track expenses, go to ‘Purchases’ > ‘Reports’
5. Download or preview expense reports

Benefits of Tracking Business Expenses

Expense tracking for small businesses or enterprises is usually done by business owners to ensure they have all expense information before the year-end. It helps them establish a financial plan for next year. Here is why tracking expenses for a small business is important.

1. Financial Management

It is a major advantage of tracking expenses. You get a clear picture of business expenditure so that you can build a robust financial strategy. Tracking expenses accurately can further assist you in investing money wisely. You can limit your spending and invest only where necessary.

2. Tax Reporting

Organizing business expenses in an efficient way can provide much-needed help at the time of tax reporting. This is because you don’t need to flip through papers for categorizing different expenses. It ensures you have everything ready at the time of your tax return. Ultimately, making the tax filing process less painful.

3. Improved Cash Flows

Since tracking expenses offers a 360-degree view of financial investments, it helps you improve incoming cash flows. It would be easier to learn at what interval you would have due payments and make adjustments prior to the due date. It provides you with complete transparency about costs incurred in the purchase of business supplies.

Tips for Tracking Business Expenses

Here are some worth-reading tips that will help in expense tracking for small businesses and enterprises accurately.

1. Invest in Reliable Software

Determine your business requirements and choose the ideal software that helps you generate expense reports easily. Make sure the chosen software has all the necessary features to automate your bookkeeping process and lets you create expenses with less effort. Also, ensure that it has cloud storage for easy accessibility of expenses and other documents.

2. Audit Expenses Timely

No matter which software you adopt, ensure that it helps you audit and categorize your expenses quickly. Developing a habit of reviewing expense metrics frequently is the best way to keep track of business expenses. By doing so, you would have an accurate track of business expenses. This will further help you survive tax season as you will have an expense report ready.

3. Filter Out Tax-deductible Expenses

Knowing tax-deductible expenses can help you achieve money-saving goals for your organization. Therefore, you should filter out expenses that are tax-deductible such as rent, marketing costs, travel expenses, and employees’ salaries. This process will not only help you in managing expenses but also reduce a payable tax amount.

Why Should I Track Business Expenses?

While you are at the helm of your business, keeping an accurate expense report is crucial for improved cash flows and financial management. Regularly tracking business expenses can not only help you boost revenue but also improve the financial health of your business.

Moreover, it can also assist you in building a budget plan for next year. Tracking business expenses means you know where you spent money. Hence, you can create a robust financial strategy as you can predict where you are likely to spend more money.

Also, you would be prepared at the time of filing a tax return and can expect cashback as well. All these things collectively contribute to running a profitable business.

Conclusion

Before wrapping up, one thing is clear if you accurately track business expenses, it would be less stressful at the time of tax return filing. Other than that, you can get a fine grip on business expenditures, which could help you achieve financial goals as early as possible. Moreover, when your business grows, it would be a real challenge to get accurate expense reports.

In this scenario, Moon Invoice comes as a rescuer, keeping all business expenses handy in the cloud storage. Thus, allowing you to generate accurate expense reports from anywhere within a minute. Avail your 7-day free trial to check out how exactly it works.

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