The Keys to Small Business Expense Tracking
Most small business owners don’t set out to become bookkeepers or accountants, but it’s part of the job when you have to wear all the hats. Whether you’re a part-time consultant, manage rental properties, or are growing a small business, keeping a close watch over your expenses can be important.
You can use your records to better understand your business, and they can be a necessity to back up your claims during a tax audit. And while hiring a bookkeeper isn’t always financially feasible, small business expense tracking might not be as difficult as you thought.
Here are a few steps you can take to get your business’s finances in order and make it easier to keep track of your expenses.
Open Separate Business Accounts
Business bank accounts aren’t technically required if you’re running a sole proprietorship, but it may still be a good idea. And if you have a partnership, limited liability company, or corporation, you likely should open official business accounts. If you don’t, you may be “piercing the corporate veil,” and exposing yourself to personal liability for your business’s actions and expenses.
Even when it’s not required, separate accounts could keep you from accidentally mixing business and personal transactions while you’re budgeting. Getting a separate business credit card can also help, and some cards offer rewards on common business purchases, such as online advertising or purchases at office supply stores.
Learn Accounting Basics
You don’t need to become a CPA to run a small business, but taking the time to learn the basics is an investment that’s sure to pay off. You could enroll in a local course or look for free resources from SCORE, a nonprofit that helps small businesses get up and running.
SCORE offers online courses along with in-person workshops and events. It can also connect you with a local mentor who will provide one-on-one support and guidance.
Ideally, try to find a mentor or course that focuses on your type of business in mind. You might find out which regular expenses are tax-deductible, how to structure your business in a financially efficient manner, and learn from business owners who’ve been successful in your field.
Get Ahead of Common Mistakes
Even if your product or service is unique, small business owners tend to make a few common mistakes. Get ahead of the curve by learning about and avoiding the mistakes as you grow your business.
For example, you may want to keep copies of your business receipts with a description of the purchase and circumstances in case you’re audited. Fortunately, you can use a mobile app to snap a picture and add notes rather than keeping envelopes full of overflowing (and fading) receipts. This is especially important when you’re using cash and won’t have a record from your bank or credit card account.
You may also be able to avoid cash-flow crunches by forecasting your business’s income and expenses (or use budgeting software to create the forecast) and prepare ahead of time. Many businesses have reliable customers and a bright future, but fail because they can’t figure out how to align their income and expenses.
Software has made tracking your business’s expenses and income easier than ever. With Quicken, you can manage your personal and business budgets using the same account, but keep your transactions separate. You can also store contracts and receipts, send invoices, create customer reports, and export your information to tax software.
Whether you want to start, sustain, or grow your business, knowing your business income and expenses can be essential for success. Fortunately, it’s easy to start and may feel familiar if you already keep a personal budget.