How To Track Expenses For Your Business

Cash flow is the lifeblood of any business. If you don’t keep track of your expenses, you won’t be able to optimize your cash flow. Here, we share tips and tricks on how to track expenses properly and efficiently for your business so you can enjoy the benefits of maximized cash flow. 

Use Business Credit Cards

Using business credit cards makes it easier to track receipts and expenses. Instead of worrying about reimbursing staff, you can provide credit cards with credit limits to save time and money. You also help establish better credit for your company, which can come in handy down the road. You create an organized, trackable credit history with easy access to your monthly expenses.

Business credit cards are also better for booking flights and hotels for business travel and often include financing and rewards that add some perks. On the flip side, you have to be careful only to use your business credit cards for business purposes and ensure you make prompt payments to avoid building high-interest debt. 

How To Track Business Expenses With Accounting Software

Accounting software automates the entire expense process, creating electronic records and helping you track how and where you spend money. Reporting tools also help you understand how your expenses impact profitability. You can make year-to-year comparisons to understand your revenue growth. Finally, accounting software eliminates the manual process of saving receipts, filing them, and recording them, which saves you money in labour as a bonus.

Accounting mobile apps are also a must-have tool for expense tracking, allowing you to scan and store receipts using your camera. You can then sync them with your accounting software, store them on the cloud, or use them to update your account books. 

Software and apps are ideal for companies that:

• Travel frequently
• Have several employees with expense accounts
• Are in growth mode
• Find their finances are getting out of control
• Don’t have an accountant or bookkeeper
• Have more than one business bank account

How To Track Expenses With A System For Tax Purposes

If you decide against using accounting software, creating a system to save and organize paper receipts is critical. Frankly, many companies using accounting software still end up with random paper receipts. If you don’t have a bookkeeper, assign someone to collect receipts from staff and file them in a designated area using a logical system so they are ready for tax filing. A good person for the job would be the person responsible for payroll, as they can also ensure staff are reimbursed for their expenses. They can then record the numbers in your books each week. 

Link Accounting Software With Your Banks

Accounting software should be linked with your business accounts to download debit transactions automatically. You can also categorize expenses based on department, type of expense, or even by employee. Integrating financial functions such as daily transactions with monthly bank statements creates a clear paper trail to easily reconcile spending, receipts, and bank statements. As a bonus, you can make payments directly from your software instead of logging into your bank accounts. These features save time and improve accuracy, ensuring nothing is missed. 

Track And Record Everything

One of the biggest challenges for expenses is remembering to track your spending. Things like buying gas when out on a client visit, meals with clients, or buying office supplies on the fly all add up but are easy to overlook. Remind your team to track and record everything and be sure you do the same to take full advantage of expenses for tax time. 

Have A Weekly And Monthly Review Of Your Expenses

Set aside time each week and month to review your expenses. Expense reports list your expenses over specific periods, providing a critical tool for review. This is the time to analyze your reports, reconcile bank statements, collect receipts from staff, and crunch the numbers.

There are a few reasons to do this:

• You get a better understanding of how your cash flows out of the business
• You help train your team to hand in their receipts on a regular basis
• You reconcile discrepancies right away, which is essential for security and spotting possible fraud
• You ensure all expenses are included on the books
• You ensure staff are accountable for their spending
• You can spot trends in spending to better prepare
• You can see the specific areas that are costing the most money
• You might find opportunities for savings, such as three people spending money on coffee supplies when you could have saved by purchasing in bulk or five people driving in separate cars to a meeting, who all claim gas, mileage, and parking
• You keep track of expense accumulation to understand when you’re dangerously close to going over budget
• Errors and omissions are corrected to improve accuracy

Basically, reviewing your expenses regularly provides a realistic look at your business’s financial health so you can make informed decisions. 

Understand The Different Types Of Expenses

Different types of expenses can impact your business in different ways. For example, accrued expenses, such as rent and utilities, payroll, and GST, are incurred before you pay for them. They should be tracked in your bookkeeping before they are paid to ensure they are accounted for when payment is due. There are also special tax considerations for things such as convention expenses. Attending a convention is a specific expense the CRA allows twice a year. It includes the participation fee and other fees like your booth, transportation, and lodging if you travel to the convention, but does not include food and drink.

Life is easier when you know what receipts to keep for tax purposes to avoid trying to sort through them when tax time rolls around. You also want to allocate costs appropriately, such as raw materials to make a product you sell or equipment required to perform a service. Miscellaneous expenses like professional fees for legal or accounting services and things like bank charges or advertising are often forgotten yet can be claimed for taxes. As you can see, it helps to understand how expenses work and what fees you can claim to help simplify expense tracking. 

Enlist Professional Help

Working with a CPA-led bookkeeper improves cash flow, providing a clear picture of your finances. They also prepare up-to-date reports for your weekly and monthly reviews and share valuable CPA insights for informed decisions that maximize cash flow. A fractional CFO can also provide financial oversight to navigate cash flow obstacles and find opportunities for growth. Expense tracking also impacts your taxes. Professional tax accountants ensure you understand available deductions and credits to minimize your tax payout.

Call Intrepidium today at 778-800-7976 or click here to schedule a consultation and learn more about accounting services to help you keep up with your expenses.