Mar 18, 2020

7 Expense Tracking Tips & Tools for Small Business Owners

When you’re a small business owner, keeping your finances organized is crucial to your success—and it all starts with a good system for tracking your business expenses. Expense tracking is the gateway to cutting costs, improving cash flow, and optimizing your deductions during tax time.

Long gone are the days of balancing a checkbook and keeping an Excel spreadsheet. Now, there are dozens of tools out there that help business owners automate expense tracking and harness financial data that can level up your business. Here are some of the best tips and tools for tracking your small business expenses.

1. Get an Accounting App

Once upon a time, you had to record every purchase you made and organize them manually if you wanted to track your expenses thoroughly. Now, there’s an app for that.

Accounting apps and software programs are a must if you’re a small business owner looking to keep track of your expenses and improve your budgeting. Not only can you connect your bank accounts so that your expenses are automatically imported, but most apps will even help you categorize your expenses and set spending limits—and some even offer reporting features. Accounting apps are also a must for those who file quarterly taxes.

2. Keep Your Business Expenses Separate

Separating your business expenses from your personal expenses is the first step to tracking your business expenses, but it’s more important than that. By keeping your finances separated, you’re demarcating your business as a separate legal entity and limiting your personal liability. If something were to happen to your business, having your business finances separate helps ensure your personal assets aren’t impacted.

You can easily keep your business expenses separate by using a separate bank account for all business transactions. If you get an accounting app, you’ll also be able to go through all of your expenses and label them as business or personal.

3. Open a Business Checking Account

The best way to keep your business finances separate is to open a business bank account and use it for all of your business finances. Not only will this help you out legally, but it will make organizing your finances a lot easier. You’ll be able to log into your business bank account and see your business expenses all in one place.

You’ll also get perks like checks with your business name on them, which makes your transactions appear more professional. Opening a business account and keeping it in good standing will help you build a business banking relationship as well, which may help you out when it comes time to apply for a business loan.

4. Get a Business Credit Card

In addition to a business bank account, you can also open a business credit card to use for all of your business transactions. You can log on to your business credit card account and see all your business expenses in one place—just like with a business bank account. However, you won’t be able to receive money with your business credit card.

One big perk of having a business credit card and using it regularly is that many offer lucrative rewards programs. You probably do quite a bit of spending as a business owner, and putting that spending on a good business credit card can earn you cash back and travel points. On top of that, you’ll be building your business credit, which you’ll need if you ever want to apply for a business loan.

5. Keep Your Business Receipts

It’s important to keep all of your business receipts, not just for expense tracking purposes but also for tax purposes. If you want to claim a business expense as a deduction on your taxes, you’ll need to have receipts to back it up in case you get audited.

You can go the old school route and keep all of your receipts in a folder somewhere, but nowadays, there are better options. A number of mobile apps allow you to scan your receipts on the spot using your phone’s camera. For example, with Genius Scanner, you can take a photo of a receipt as soon as you get it, and the app converts your photo into a scanned PDF document. These scans of your receipts are then saved to the app so you have them all in one place.

6. Pull Financial Reports

Tracking your expenses doesn’t get you very far if you don’t do anything with that information. Once you’ve got a system for tracking and categorizing your expenses, you should start pulling financial reports regularly—you can do weekly, monthly, and annual reports. These reports should give you an overview of your company’s financial performance, such as your overall revenue and costs.

Some accounting apps offer this feature already. Since you’ve already imported all of your business’s financial information into the app, you can easily run reports such as profit and loss statements, balance sheets, or tax summaries.

7. Hire a Bookkeeper

Depending on the size of your business and the complexity of your finances, it might be time to hire a bookkeeper. Apart from simply tracking your business expenses, a bookkeeper digs into your business’s finances to generate reports that can help optimize your cash flow, redirect your spending when necessary, and even help you create a financial plan for your business. Bookkeepers will also ensure all your bills and invoices are paid on time and your taxes are filed properly.

If you’re not ready to bring on a new employee, there are also accounting apps that offer the option of bookkeeper support with certain plans. This person will usually be available for all your bookkeeping needs through text and email and sometimes by phone. 

About the author

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Elizabeth Aldrich
Elizabeth is a freelance writer covering personal finance, business, and travel. Her writing has appeared in The Motley Fool, Business Insider, Yahoo! Finance, LendingTree, Student Loan Hero, FOX Business, and more.

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