How to Keep Track of Business Expenses
As business owner, do you ever find yourself asking “where did all my money go?”
If you find it hard to keep track of your business expenses, you’re not alone. Many business owners focus most of their time on generating revenue by doing what they love…as they should! Yet it’s equally important to make the time to track your business spending so you can prevent unnecessary profit leaks in your business.
Without tracking business spending, it’s easy to let expenses accumulate and then wonder why your business isn’t generating more profits. A new software trial turns into a subscription that gets forgotten about, that new course you bought goes unfinished, your social media ad spend goes unchecked….and the numbers start adding up quickly.
So how do you keep track of your business expenses without your eyes glazing over looking at all the numbers?
It doesn’t have to be complicated or take long hours! Here, we offer some guidance to help you get started with keeping track of your business expenses in 3 simple steps.
Why Should You Keep Track of Your Business Expenses?
Even if you have an accountant or a bookkeeper helping you with your business finances, it’s wise to keep track of your business expenses on a regular basis. You’ll have a better pulse on your business, putting you in a better position to make decisions that save you time and money in the long run.
Keeping regular track of your business expenses better helps you:
Make better financial decisions in your business
Catch any mistakes or duplicate charges
Decrease unnecessary expenses
Stick to your business budget
Make tax preparation easier
The best way to get started with tracking your business expenses is to make a list of all your business accounts so you know what you’re working with.
If you have not yet separated your personal and business accounts, that’s your first step!
Not separating your personal and business expenses makes it much harder to keep track of where each expense came from, to understand your true Profit & Loss position, and to put together your financial statements for tax season.
How Often Should You Keep Track of Your Business?
Once you’ve decided you’ll start keeping better track of your business expenses, you may be wondering how often you should do it. And most importantly…how do you find the time for it when you’re so busy with everything else?
First, it’s ideal to keep track of your business expenses at least once a week. This way you can catch and resolve any issues early. Plus, you’ll have less to deal with at one time than if you let expenses accumulate for longer periods of time.
Next, we highly recommend setting a date with your business finances. Yes, we know…that might not sound like the most fun way to spend your time…but when your profits increase, you’ll be rewarded with more time (and money) for those other fun dates with your family, friends, or favorite past-time activities!
Rather than finding the time in your business to keep track of your expenses, decide now to make the time for it.
Set a time you can commit to tracking your business expenses every week. For example, you could have a “Financial Friday Power Hour.” Set aside one or two hours in your calendar to catch up on your business finances, review expenses, review outstanding invoices, or do anything else that might be needed to keep your business finances healthy.
Pro tip: Pick a day of the week and time for your “business financial date.”
Mark it on your calendar now as a recurring event.
Now that you have a weekly date to keep your business finances in shape, let’s take a look at 3 simple steps to keep this process easy and productive.
Step 1: Record Your Business Expenses in One Place
Your first step will be to pull up your business bank accounts, your business credit card accounts, and any other business accounts you may have such as Paypal. Are you buying services or products with cash? Be sure to keep all of your receipts!
This is where having some sort of business budgeting or financial management software such as Quickbooks can make your life as a business owner much easier. A business budgeting or accounting software can save you time and headaches of doing everything by hand because it imports all of your expenses in one place.
You’ll want to link all of your business accounts to the software of your choice so you don’t have to manually input everything every time you do this exercise. If you use Quickbooks for your business finances, open up Quickbooks. Go to the Bookkeeping tab to review your transactions. If you use a different business budget software, find where your business expenses are listed.
Step 2: Review and Categorize Your Expenses
Now review your transactions for the past week one by one. (See why it’s better to do this weekly than to have a much longer list of transactions at the end of the month?)
Make sure each transaction from your business and credit card accounts is also showing up in your business budget software. If there are any expenses that aren’t recorded in your software, be sure to enter them with the correct date, amount, and category.
Then, categorize your expenses by type such as rent, office supplies, utilities, advertising, marketing, or travel expenses. This could help you identify areas where you can cut costs.
As you categorize expenses, you may notice patterns…
Are you spending more in one category than you’ve budgeted for?
Are there any unnecessary subscriptions you should cancel?
Are there charges that you don’t recognize and need to look into further?
Nowadays, with so many subscription-type services, products, and memberships, it can be easy to miss a charge on your card until months down the road. Keeping track of your business expenses can help you plug these profit leaks early!
📖If you don’t have a business budget yet, read this post to learn How to Create a Business Budget in 3 Simple Steps.
Step 3: Keep an Eye on Recurring Expenses
As you track your business expenses every week, you’ll notice that your business probably has several recurring expenses. While some of these may occur monthly, others might occur on a quarterly or annual basis. You’ll want to keep track of these expenses as you build out your business budget so you can plan for months when more recurring expenses occur.
When you notice a recurring expense, here are 3 questions you can ask to determine if that expense is still a good investment for your business.
Is there a positive return on this investment (that you can measure directly)?
Is this helping you save money in the long-run because it frees up your time?
Is this automating a part of your business that would otherwise require you to hire someone else or to spend more of your time on a certain task?
You might even consider creating a spreadsheet where you can view your recurring expenses based on frequency: monthly, quarterly, annually.
Not sure where to find your recurring expenses? Pull up your business credit card summary for the past two years. Sort it by amount. Then scroll through while looking for multiple charges in the same exact amount. This will make it easy to identify recurring expenses and manage them.
Plug Profit Leaks by Looking at The Big Picture
Keeping track of your business expenses weekly will help you prevent impulse purchases and make you more mindful of your business spending. When you make purchasing decisions in your business, you can now be more intentional about the process. If you’re not sure if you should make (or continue making) a certain expense in your business, ask yourself:
How is this purchase an investment in the future growth of my business?
This will help you determine what role an expense plays in your overall business plan and budget. You can also consider how a purchase might support your KPIs so you can make strategic decisions that support the sustainable growth of your business.
To recap, here are the 3 steps you can start taking now to keep track of business expenses:
Step 1: Record Your Business Expenses in One Place
Step 2: Review and Categorize Your Expenses
Step 3: Keep an Eye on Recurring Expenses
Be patient with yourself as you get more comfortable tracking expenses on a weekly basis. It will get easier every time!
If you’re a visual person, it’s now easier than ever to see the health of your business finances in one place so you can make better decisions without trying to decode numbers in a spreadsheet. Metrique gives you a clear picture of trends in your revenue, expenses, and profits so you can manage your business like a pro in just a few clicks. Click here to see how Metrique can help you see the big picture of your business finances, track your budgets, and grow your profits!