Most people and businesses make multiple purchases a day. Whether you’re buying a cup of coffee on your way to work or ordering a new outfit online, they all add up. Unfortunately, you can’t see how quickly the credit card bill goes up unless you know how to keep track of expenses constantly.
If you can’t track your expenses, you may end up spending too much. You could go over your budget, max out your credit card, or overdraw your account. For all of those reasons, you need to take expense tracking and money management seriously.
How do you efficiently report expenses when they occur multiple times a day?
It can be challenging, but don’t worry—we’ve got you covered. We’ve done all the research to help you start keeping records of your expenditures. Read on if you would like to learn more about:
- What Expense Tracking is and Why It’s Important
- Reporting Personal and Business Expenses
- The Best Way to Track Business Expenses
What is Expense Tracking?
Expense tracking is the process of keeping records of your daily purchases. You report these expenses by recording invoices, receipts, bills, and more. Not only does expense tracking help you around tax time, but it also plays a crucial role in budgeting. Whether you have personal budget goals or limits for your small business, expense tracking can help.
If you only use one account for spending, you may be able to get away with simply tracking your spending through your bank or credit card statement. However, payments with cash are more difficult to track. Therefore, you need to make sure that you accurately report any purchase you make in an expense tracker.
Why It’s Important to Track Expenses
Many people often ask, “why do I have to write down every expense? Why is it so important?” The short answer is that it helps you manage your finances. However, there’s more to it than that. In fact, there are many benefits when you track your expenses for business or personal reasons.
Improved Cash Flow
Tracking your spending allows you to better manage your money. If you have more money going out than coming in, you need to reassess your cash flow. After all, a lack of cash flow can kill a business almost as fast as bad PR.
The only way to ensure adequate cash flow is by recording your daily expenses. This allows you to see exactly where your money is going and how it fits in your budget. Tracking your spending doesn’t just show you which areas to cut back on spending. It can also highlight the areas that could benefit from more money.
Easy Tax Preparation
If you aren’t keeping track of monthly spending, you could find yourself in trouble around tax time. Organizing your spending for a whole year in a few months only adds to your regular responsibilities. Businessowners already lack time, so the added stress only complicates things further.
Fortunately, things like filing taxes become easy when your company keeps a record of monthly expenses. A spreadsheet is a great way to monitor spending in categories, and it is easy to update each month. You can add categories for each expense too, which helps you get all of your deductions at tax time. Your spreadsheet might include several categories, such as:
- Travel Expenses
- Office Supplies
- Apps and Software
- Health Insurance
Timely Employee Reimbursements
If you have employees, keeping track of expenses is equally important. Small businesses especially need to make sure that employees are tracking expenses made with their own money or credit cards. An accurate report of their spending ensures that they get reimbursed when they use their own money. To get their money back as quickly as possible, they should write down purchases in an expense report for approval.
More Accurate Business Forecasting
Last but not least, tracking your expenses allows you to make better business decisions. A detailed spreadsheet can provide a lot of information. A record of monthly spending gives you all the data you need to calculate your business’s profit for the month. If you have a report for every month, you can start to see a trend in your profitability. With that data, you no longer have to guess. Instead, you can make well-informed decisions and position yourself for success.
How to Track Expenses – Personal
If you want to make sure that you stay within your budget every month, you should record every purchase. This is especially true for purchases made with cash. In fact, personal finance gurus often encourage you to write down the amount of cash you spend each month. Since you don’t see the money adding up on a bill, you often don’t realize how much you are spending.
Regardless of whether you pay with cash or a debit card, you should know how much you spend every month. To do so, follow these three simple steps:
- Save Your Receipt: While a purchase made with a debit card can be confirmed in a statement, cash purchases can’t. Therefore, it is especially important that you record the expense and save the receipt.
- Input Data: You can manually input the amount you spent in a spreadsheet, or you can use an app. Either way, the amount of the expense gets placed in the appropriate category.
- Compare Reports: Once you complete your financial report, you can compare your findings to other reports. We recommend using your spreadsheet for bank account reconciliation. You can even compare it to your budgeting goals for the month so that you know how you’re doing.
How to Keep Track of Business Expenses
Tracking your expenses in business follows much of the same steps as we covered for personal spending. It is often more complex; however, it doesn’t have to be difficult. You can simplify the process by following these guidelines.
Invest in Accounting Software
Stop doing all of the hard work with a paper ledger. Accounting software makes tracking your spending easy and stress-free. These programs help place your purchases into tax-friendly categories, and they aid you at tax time. Not to mention, they are much easier to correct if you make a mistake!
Use Dedicated Financial Accounts for Business
If you are a solo entrepreneur, don’t use the same bank account for your business and personal purchases. This creates more work. If you only have one, you can link it directly to accounting software to automatically import purchases. Businesses with employees should also issue credit cards to employees to keep expenses all in one place.
Report Every Purchase
Whether you are working with a receipt scanner app or spreadsheet, you need to report every purchase. No matter how large or small, they all add up at tax time. If you are working with a strict budget, you won’t want to miss out on any expense either.
Regularly Review and Categorize Expenses
Software has come a long way, but you still may have to manually select a category for your spending. We also encourage you to regularly review your expenses for accuracy. Once you verify everything is correct, you should get a better look at how you are doing with budgeting.
What is the Best Way to Track Business Expenses in 2021?
In today’s modern age, spending is easier, but so is tracking your money. With all of the advances made in recent years, you no longer have to rely on an envelope to store your receipts. In 2021, we recommend that all businesses use an app for tracking spending and budgeting.
Many great expense tracker apps exist for iOS and Android, so they are easy to get. Regardless of which one you choose, you can enjoy:
- Receipt Scanning
- Organization by Expense Category
- Automated Expense Reports
- Budgeting Tips
- And More!
Managing Business Expenses with WellyBox Expense Tracker App
Start using WellyBox as your expense tracker app if you want to record digital and paper receipts. Our automated process allows you to quickly scan unlimited email accounts to track bills, invoices, and receipts. We make sure no expense gets forgotten! You can also set up your camera to take photos of paper receipts if you want to digitize them. From there, we take the data and create a helpful report.
All of these services are included with a free plan, but you can also upgrade for more money. Our premium plans offer more storage and scanning capabilities, and they start at just $5.99. With all of our options, we can work within any budget.
If you would like to learn more about how our app can help report and manage your money, check out our benefits and features. You can also check out some of our related articles to learn more about expense management and budgeting.