If you’re self-employed or a small business owner, chances are bookkeeping isn’t something you got into your profession to do. Nevertheless, as you start to earn more money, small business expense tracking should become an ever more critical part of your everyday routine.
If you're waiting until tax season to be concerned about small business expense tracking, you're more than likely leaving money on the table. Fortunately, you're not alone.
At John F. Dennehy CPA, we have a team of certified public accountants who specialize in helping small businesses maximize tax planning. We offer a range of customizable solutions designed to help you save time and money.
We encourage you to reach out to the team at John F. Dennehy CPA today for a consultation. And in the meantime, continue reading to learn more about a few of our top small business expense tracking tips and best practices.
Avoid Overlapping Personal Finances with Business Finances
As a business owner, it's critical that you keep your personal and business finances separate. Aside from the fact that it becomes difficult to separate personal and company expenses as time goes on, it also becomes problematic if you run into a tax audit. To avoid the mix-up, start using separate bank accounts every time you pay your bills or carry two separate credit cards – one for business expenses and the other for personal expenses.
Save All Your Receipts
Although it can be tedious to manage, receipts are necessary to document tax-deductible expenses (especially during a tax audit). Instead of keeping each individual receipt and storing them in a cabinet, save storage space by using a scanner to create photos or PDFs of all the receipts.
To make sure you don’t forget what the expenses were for, be sure to make a note of its purpose somewhere on the receipt before scanning it. Depending on your comfortability with your smartphone, there are a number of mobile apps designed to make saving and organizing your receipts as easy as possible. Whether you do your own taxes or work with an experienced accountant, you can save money and time by digitizing your receipts.
Use Technology to Make It Easier
Keeping an updated spreadsheet is not only time consuming, but exhausting as well. Thankfully, there is no shortage of mobile apps or online tools you can use to do all the hard work for you. If you are already committed to an accounting software, QuickBooks or Concur may be the right choice for you. If you are looking for something at a lower cost, other popular options include Expensify, Zoho Expense and Rydoo.
If you are unsure how to move forward with managing your expenses or want to rid yourself of the responsibility altogether, hiring an accounting firm to do your accounting and bookkeeping can provide to deliver ample benefits.
Review Your Expenses Often
Understanding where your money is going is a part of small business expense tracking that many people do incorrectly. To monitor expenses correctly, books should be reviewed on a weekly basis.
Looking for things like unpaid invoices or unnecessary spending is important to help reduce the risks of bounced checks or large margins of deficits. At the end of each quarter, take a deep look at finances to see where changes need to be made in order for unnecessary costs to be eliminated.
Understand What the IRS Deems as a Business Expense
The IRS deems business expenses as a cost that is necessary to carry on a trade or business. Thinking about having lunch with a client to negotiate a sale? That can qualify as a business-related expense.
Thinking about taking your client out to a football game after? That may not count as a business-related expense. New changes to the tax law have made a variety of entertainment-related expenses no longer deductible. Because of the complexity associated with eligible business-related expenses, it's important to have a clear understanding.
Monitor Petty Cash
Yes, petty cash is intended for minor expenditures, but all too often it can become a consistent source of spending. Be sure to monitor petty cash the same way you monitor your bank accounts and credit cards to monitor spending patterns over time. If possible, limit petty cash expenses altogether.
Avoid Spending Cash Entirely
In fact, if you're using cash for expenses, you may be making a grave error. Cash is much harder to track and document. At the same ti me, cash is much easier to spend. The best solution when it comes to tracking business expenses is to use with debit cards and credit cards as much as possible. In the end, it's much easier to reconcile debit and credit car transactions.
Contact John F. Dennehy CPA for Help with Small Businss Expense Tracking
When it comes to small business expense tracking, it's all about being prepared. And the team at John F. Dennehy CPA can help you confidently check all the boxes. We offer a full range of business accounting, tax planning, tax preparation, bookkeeping, and other services to help you stay ahead of Uncle Sam.
Contact John F. Dennehy CPA today for a free business expense and tax consultation.