As a small business owner, you need to maximize your ROI and facilitate real growth. In the process, you must track and manage your company’s expenses to avoid overspending along with potential compliance issues with the IRS and other parties.
To help you maintain effective small business accounting practices, the following are some of the specific ways to track your small business expenses.
1. Establish a Specific Budget
First, figure out what kind of budget your business has before making investments. Consider what your business will need to spend money on and allocate a specific budget for it ahead of time. You can then determine how much you spent at the end of a given period and measure it against your projections, which will help you better determine how big your budget needs to be to account for upcoming expenses, whether you need to reduce or expand it.
Over time, as your business scales, you can modify your budget accordingly.
2. Look for Opportunities to Save Money
As you manage your small business’s expenses, you might find certain opportunities to cut down on your costs. For instance, you might discover that you’re spending more on certain products or services when less expensive but equally effective and efficient options are out there. You might also discover certain unnecessary overhead costs that you can reduce, with potentially better offers available on everything from supplies to office spaces.
3. Track Cashflow
Map out all of your costs to better calculate what funds you have. In the process, track all payment methods, including cash and check, along with credit cards and loans. Getting a full picture of cash flow will further help you manage all expenses.
4. Pay Off All Debt
Don’t let credit card debt or loans get ahead of you. Make sure you keep track of debt and get a handle on what you can spend to comfortably pay off current debt at the end of every cycle. Otherwise, you can quickly find your business falling behind as you discover you’re unable to keep up with your expenses.
5. Maximize Deductibles
Keep records of all of your business expenses, seeing as many of them could help you increase your deductibles around tax season. Items to track could include physical and digital copies of receipts and other financial records indicating business expenses. At the same time, be sure to separate these expenses from personal expenses, which you can do more efficiently by having a personal and business bank account.
6. Categorize Expenses
Another way to help you manage spending is to strictly categorize all costs. For instance, you can divide expenses into specific types such as:
- Insurance
- Advertising and marketing
- Utilities and rent
- Shipping and postage
- Office Supplies
- Business travel
- Employee costs, including onboarding, salaries, and benefits
Based on what areas take up the most spending, you can determine if there are ways to cut down on costs or if there are areas that could benefit from reallocated funds.
Reach Out to The Total Wealth Group
By keeping track of your small business’s expenses, you’ll be able to paint a complete picture of your business’s financial situation. In turn, you can find out how much you’ll need for your business and each spending category while finding ways to save money.
For help with small business accounting, turn to the experts at The Total Wealth Group. We’ll work with you to develop a plan that works specifically for your business, ensuring you get the solutions you need for everything from effective bookkeeping and expense management to tax compliance.