Tracking business expenses is crucial, and a lot less painful if you have the right tools. Using business accounting software makes it easier to track all expenses neatly. Good accounting software also make sure you have access to up-to-date financial information which may be crucial during tax time. Some of the business expenses to keep tabs on include:
- Bank fees
- Consulting fees
- Contract labor
- Postage and deliver
- Dues and subscriptions
- Office supplies and more
How to track your small business expenses
As aforementioned, the best way to track your business expenses is by using business accounting software. Alternatively, you can track them manually by doing the following. We recommend tracking manually if you have a few expenses to trail. With that in mind, here is how to track your expenses.
Open a business bank account
Avoid using your personal account for business transactions. Although sometimes you will find yourself using your personal account, try to use a business account to manage your expenses properly.
Track your expenses
From the start, you need to come up with a way of tracking your expenses. This includes organizing receipts and other crucial records. Make sure to store your receipts and other documents well. To simplify tracking, consider also using the same debit or credit card to make business-related purchases. A good accounting system comes in handy here.
Choose the right accounting system
Choose a system suitable for your business. In most cases, your budget will determine which solution to settle for. Free accounting systems like Accounting by Wave and GnuCash come in handy when running on a tight budget. You can also use spreadsheet software such as Microsoft Excel. Popular accounting software to include Xero, FreshBooks, and QuickBooks.
The advantage of using popular accounting solutions like FreshBooks is that they have additional features you may need. For example, the majority offer payroll as a feature. Keep in mind that you will get to a point where you need to hire. So it makes sense to have an all-round system that supports the growing demands of your business.
Select cash or accrual accounting
Cash or accrual accounting? You have to choose which is appropriate for you. Most small businesses opt to use cash accounting.
In cash accounting, transactions are recorded when they occur. For example, income is recorded when it is received and payments when they are made. Accrual accounting is more complex and suitable for large businesses. With this accounting, income is recorded when a product is sold, not when payment is received for that product. The same goes for expenses. They are recorded when the bill is received, not when paid.
Connect your financial institutions
It is recommended for small businesses to streamline tracking by connecting their accounting software with their financial institutions. It is a safe practice to do so and allows small businesses to download all banking transactions directly to their accounting software effortlessly.
Manage the receipts well
The best way to manage receipts is by using mobile apps available with accounting software applications. Luckily, most accounting software have such apps. If your software doesn’t have one, consider shifting to another solution.
The advantage of these apps is that they allow you to take pictures of receipts and upload the image for future use even when on the move.
Establish sales tax procedures
It is obvious you have to honor tax obligations when in business. Understanding tax regulations and procedures go a long way in helping you play by the rules on matter taxes. This includes understanding whether you are operating your business in an origin-based state, destination-based state, or selling to international customers.
Keep a clean record of all expenses
Managing all your expenses well is something you need to consider very seriously. The easiest way to do that is to connect your accounting software to your financial institution. Doing this automates the entire process and especially when importing transactions. You can as well enter expenses manually using applications like Kashoo. Don’t forget to complete your bank reconciliation every month so that all transactions are accounted for well.
Consider using an expensive app
It is optional to use one but worth it if you travel a lot for business. Such an app will help track your travel expenses as well as other business-related expenses. Make sure to research well before choosing.
What is the best software for tracking expenses?
There are a lot of simple to complex software that you can use. Google sheet and Excel templates are among the simples ones to bet on. We recommend using the simple tracking software before advancing to the complex ones. But you have the freedom to decide which software to use.
Small business accounting FAQs
How do you keep accounting records for small businesses?
The easiest way is to set up a basic accounting record in a spreadsheet. Though this method is recommended, it is prone to error, more tedious, and time-consuming. The best approach would be to manage your expenses via a secure cloud-based platform.
What is the easiest accounting software for small business?
You can choose from the various user-friendly options for small businesses, some of which are free and others paid. Here are some easy-to-use accounting solutions for small businesses: Zoho Books, Xero, Quickbooks, and Freshbooks. Feel free to browse for more easy-to-use software.
How much are accounting fees for small businesses?
Accounting fees do vary depending on the needs of a business. They can also vary widely based on the structure of a business, its accounting team, technology, and the features it needs. Basically, you pay more if you need an advanced accounting solution.
What does an accountant do for a small business?
An accountant for small business does a lot of things, including auditing cash flow, managing debt, writing business plans, and managing inventory. They can also advise on personal finances, oversee payroll, recommend business tools, and chase down payments.
How much is an accountant for a small business?
Small business accountant vary widely based on a number of factors. For example, if hiring in-house, be prepared to pay an average annual salary of $70,000. According to PayScale, bookkeepers comes in at $17.26 per hour. If you decide to outsource, be also prepared to meet the demands of the different account firms. In most cases, your business needs and the complexity of your accounting contribute to how much you will pay for an accountant.
What does a bookkeeper do for a small business?
A bookkeeper is involved in the following activities:
- Recording transactions
- Preparing financial statements
- Sending invoices
- Managing accounts receivable and accounts payable
- Basic payroll and more