Tracking your business expenses is a vital part of ensuring that you know how much money your business actually costs and profits as well as keeping your tax bill as low as possible. But tracking small expenditures is challenging for a busy small business owner. How can you make it easier on yourself? Here are a few simple habits that anyone can build.
1. Create Files
A very nascent business can get away with the proverbial (or literal) shoebox of receipts. But once you start to grow, it's time to throw out that box. Instead, make a set of files at the start of each year. These can be actual files, clear binder sleeves, envelopes, or anything else that makes sense to you. Get used to throwing receipts in their category of file.
2. Attach Receipts
Modern bookkeeping software — even the most basic and user-friendly — generally offers a way to upload and attach receipts to virtual transactions. Use this feature to turn paper receipts into a digital version. This eliminates the need to keep paper documents and makes transactions easier for bookkeepers and accountants to manage without bothering you.
3. Write on Receipts
The simplest way to help you, your bookkeeper, and your accountant put expenses where they belong is to write notes on the receipt itself. Develop the habit of writing a quick note as you get or file your receipts, indicating things like what was bought, the job it's for, or why it was bought. Don't rely on your memory, or let others do the data entry without your involvement.
4. File Each Day
It's difficult to find time every day to work on your receipts, but it's a great habit that will serve you well as long as you're in business. If you write down, enter, upload, or file your receipts daily, it will just take a moment. Letting them build up makes the job harder and longer.
5. Learn About Accounts
Your chart of accounts is a great tool for tracking costs and individual expenses. Learn what it includes. The chart of accounts is a list of the categories in which income and expenses are placed in your particular books. As you familiarize yourself with the categories (and even their associated numbers), you'll be able to quickly note where a receipt should go and you'll do it consistently. And both you and your bookkeeper will be on the same page.
Where to Start
Want help setting up a better system for tracking your business expenses? Need to get caught up? Or do you want a more useful chart of accounts? Start by meeting with an experienced accounting service in your state today.
For more information about accounting, contact a local company.