Expense Tracking 101
While income is easy to track, business expenses can be more challenging. They come from a variety of sources, so it can be hard to track each one. Nevertheless, they need to be organized.
Efficient small business expense tracking can make a huge difference at tax time. When you keep track of your expense deductions, you can save a lot of money. In fact, many businesses can reduce their taxes by hundreds or even thousands of dollars.
Unfortunately, many small business owners struggle to keep track of receipts throughout the year. Even if the purchase was for a small amount, it can all add up in the long run. Therefore, you need to learn the best way to keep track of receipts and expenses.
If you’re feeling overwhelmed and need help with tracking your spending, read on. This blog will teach you the basic of expense tracking, including:
- How to Track Receipts
- Receipt Tracking Methods
- Compare Daily and Monthly Expense Trackers
- How to Choose a Software to Track Your Expenditures
How to Keep Track of Receipts
With every purchase, you get a receipt. If your business makes multiple purchases a day, those receipts can quickly pile up. Some may get thrown out. Others may get lost. With so many incoming receipts, it can be difficult to make sure that they are recorded.
Paper receipts aren’t the only ones that need to be tracked, however. In this digital age, more and more businesses are opting for digital receipts, which are sent via email. While this might seem easier to track, they can also get lost in other folders and email addresses.
So how do you track all of your business receipts?
It doesn’t have to be complicated. To simplify your small business expense tracking, follow these three steps:
1.) Keep Each Receipt: Whether it is a digital or paper receipt, keep it. Don’t delete or throw away any receipts—no matter how small. They can all add up to major tax deductions at the end of the year.
2.) Process Them Frequently: Whether you use a budgeting app, an excel spreadsheet, or pen and paper, you need to process your receipts. To do so, you need to input their amounts, dates, and categories. This can be done each day, week, or month depending on how many expenses you incur.
3.) File Receipts Away: Don’t throw them away after you record them! All of your receipts should be kept in a file for 2-3 years in case any future discrepancies should arise.
Choosing a Receipt Tracking Method
Now that you know more about how to track your spending, you should select the most efficient method for your business. Many business owners often ask, “What is the best way to keep track of receipts?” Since every company has different expenses, there are no one-size-fits-all solutions. However, there are several options from which you can choose:
- Software: There are many popular options for online expense tracking. Software like Wellybox allows you to track and record all digital business receipts in your company inbox.
- Excel Spreadsheets: If you have a good mix of paper and digital receipts, excel can be a great choice. It allows you to combine all of the information in one flexible space.
- Project Budget Tracker: Budget tracking project management differs from recording general purchases. It allows you to monitor how much money is left for a specific project rather than the whole company.
After you determine the best way to keep track of invoices, you should pick categories for your expense tracking sheet. Creating categories is critical for managing your budget. It allows you to see where your money is going and which departments you can cut back. The following are just a few of the popular expense categories used for project budget tracking:
- Rent or Mortgage for Office Space
- Home Office Costs
- Furniture, Equipment, and Machinery
- Office Supplies
- Advertising and Marketing
- Business Software
- Travel Expenses
- Vehicle Expenses
- Employee Benefits
Daily Expense Tracker vs. Monthly Expense Tracker
With today’s technology, more and more companies are choosing to use an online expense tracker. When you track your spending online, you can reduce your expense management time as the program automatically categorizes online expenses. However, there are different types of trackers. You can choose between:
- Daily: We recommend updating your expense records often if you make several purchases a day.
- Monthly: If your business expenses occur less frequently, you can get away with processing them once a month.
Daily Expense Tracker
When you use an record your costs online, it becomes easier to record receipts daily. You no longer have to worry about going over a project budget or losing track of a purchase. Everything is added to your spending tracker spreadsheet right away. A good tracker should allow you to record both income and expenses. This gives you a better picture of your company’s finances every day.
For your everyday report to be most beneficial, you need to be able to instantly record your receipts. This can be challenging if you rely on a day-to-day expense record excel sheet. If employees are away from their computer or office, they have to wait to record their purchase. However, a daily expense tracker app allows you and your employees to maintain an accurate report on the go.
An online program like Wellybox can scan all of your company emails to track any digital receipts. It makes tracking your expenses easy. You never have to worry about missing out on critical tax deductions. The program can even sync with your accounting software of choice, such as QuickBooks and Xero.
Ultimately, a reporting purchases each day can help you generate a broader report. With all of your transactions recorded, you can look at your overall budget, income, and purchases.
Monthly Expense Tracker
If your business doesn’t have many expenses each day, then you can just stick with a monthly expense sheet. Though it isn’t always as up-to-date as a day-by-day expense tracker report, it takes less of your time. While an online expense manager is mostly hands-off, you should still take time to check it every day or week. You may also find some expenses need to be categorized manually, especially if you don’t have a digital receipt.
One of the nice things about a monthly budget reporting system is the cost. You can easily download a free monthly expense tracker, or you can opt for a monthly expenses excel sheet. While these options are free, they require much more time than an online monthly expense tracker.
When compared to a day expenditure record, your monthly expense sheet still provides the same benefit of allowing you to manage your spending and budget efficiently. The only difference is that it looks at your expenses from a distance. You can see your spending habits and review where your money is going.
Lastly, a monthly expenditure sheet is easy to audit. You can compare your chart to statements from bank accounts or credit cards. If all business expenses have been recorded properly, your numbers should be the same.
How to Choose Your Online Expense Tracker
Whether you want a track your expenses daily or monthly, there are many options from which you can choose. Aside from finding an option that fits your budget, you should ask three questions before selecting your online expense tracker.
Does it Read Digital Receipts? A daily income and expense software like Wellybox has the ability to scan for digital receipts. You can connect it to your mailbox, employee mailboxes, and other inboxes. Our software can search Gmail, Yahoo mail, Outlook inboxes, and more.
Can it Classify Documents? While some online programs only source the receipts, Wellybox and other trackers can classify them. You can personalize your tracker by choosing what documents to scan, the time period, and where to send them.
Is it Secure? To top it off, you need to choose secure software since it will be scanning critical data. Wellybox never shares data with 3rd party services, and we’ve been audited by a Google-approved partner for added security.
Start Tracking Your Business Expenses Today
No matter the size of your business, you should take the first step towards recording your receipts with an online expense tracker. Sign up for a free trial of Wellybox for up-to-date, secure tracking. You can also upgrade to our freelance or business plans for even more benefits and features!