If your business requires frequent purchases or travel expenses, keeping track of these expenditures may cause you quite the headache. If they are not tracked properly the headache could become a migraine. Managing the cash flow within your business is next to impossible if adequate records are not maintained. Many tax deductions could be missed if your expenses haven’t been tracked correctly throughout the year. Finding the right tracking system for you and your business may dull that headache. I have a list they may help keep track of your expenses. Whether you are a one-person show or have a team of employees, implementing a few of these tips may help you stay on top of your cash flow.
I hope you enjoy Cathy’s Tuesday Tip! ~Cathy
Apply for a business account at the bank and also a business credit card. Keeping track of spending becomes more difficult when business and personal purchases are made through the same account. It is hard to keep them separate while using one account.
Yes, a log of spending is important but maintaining a business account makes it a little less difficult. With online banking becoming more and more popular, it allows for ease in record keeping. How convenient is it to just pull up the account and see what is pending and what has cleared, the dates these transactions occurred and to whom.
The last tip given makes this tip easier. Some may log expenses daily and others bi-weekly. The longer the gap between log ins allows for purchases to be forgotten and fall through the cracks. This doesn’t have to be super detailed just enough to be clear when it comes time to budget or just in case there is an audit.
Using an App
There is an app for everything, even for logging expense and travel! There are apps, such as Expensify and Triplog, that combine tracking mileage and expense in a one stop shop. Just a note, many of these apps are free but beware. They may only allow one user or a limited number of expenses to be logged before being charged. These types of apps are an easy way to streamline this process.
Firm Submission Policy in Place
Be sure employees are aware of the policies. Lay out simply what mileage rates are, what is an acceptable expense, and also when expenses should be turned in for timely reimbursement. Be sure employees are schooled on what needs to be included when submitting expense reimbursements.
Outline exactly what is expected and what is appropriate to be submitted for reimbursement… No lavish dining, reasonable airfare and moderate hotel stays. Ultimately, maintaining control of the budget is the goal.
Know What is Deductible
In general, the IRS states that business owners can deduct any expense that is “both ordinary and necessary.” If you’re unsure if a business expense is considered ordinary and necessary, your best bet is to consult the IRS small business deductions page as well as your accountant.
It can be challenging as business owner to run a business and also handle business. Keeping track of expenses, like I mentioned above, is a headache but doing so can make it easier to run your business and manage finances. Using these tips can help develop a process and outline expectations of your employees.
I hope you enjoyed Cathy’s Tuesday Tip this week. To view more of Cathy’s Tuesday Tips, visit our blog.