Financial management is a big feature of self-employment, but not all entrepreneurs get excited about crunching numbers. Finance experts aside, many small business owners would like to handle their finances without a lot of fanfare, covering all the accounting essentials without overthinking the books. Unfortunately, a laid back approach can spell doom for your business financials. At the very least, passive money management means you’ll spend valuable time sorting things out during tax season, which doesn’t always end well.
Last minute tax surprises can leave you without a plan. Rather than turning your back on day-to-day cash flow management, it is better to closely track expenses throughout the year, so you’re not caught off-guard when the taxman calls. Tax preparedness is only one strong argument for tracking our expenses; there are plenty of reasons to keep tabs on your finances. Even if you lack experience or find the tasks tedious and intimidating, your basic business I.Q should include general understanding of the financial principles guiding commercial success.
Learning to properly track business expenses is a big step toward financial good health. Once you’ve cleared the first hurdle, excepting financial management as a series of opportunities, rather than a task to avoid, you’ll need a basic set of tools to build and maintain a healthy financial foundation. A recent Inc. article shared straightforward moves you can make to stay on top of your business finances.
Establish Business Banking
Your commercial financial identity may blend into your personal finances, particularly as a sole proprietor, but it’s important to separate business transactions from personal cash flow. A business checking account is a good first step, building business credit references that may prove helpful in the future.
For further convenience and accountability, it pays to add a business credit card to your financial fleet. In fact, using the right card actually pays dividends, providing opportunities to earn free travel, cash back, and other perks.
Holding onto receipts protects your business in more ways than one. Keeping sales slips on file provides a fast reference when reconciling accounts, and if you’re ever asked to prove a purchase, there’s no better way to confirm spending than producing original receipts. If paper copies make the most sense for your system, file receipts by month. Better yet, organize digital receipts electronically, enabling you to send copies to your bookkeeper without delay.
Hire a Bookkeeper
Professional bookkeepers have experience in areas that are beyond the scope of your business. Hiring-out accounting duties ensures your books are kept in proper order, as well as bringing a trained eye to your business finances. Even if your bookkeeper isn’t a tax expert, you’ll benefit at tax time, because your business will be well-prepared to complete an accurate return.
Keep Time on Your Side
Effectively tracking expenses creates a snapshot reference of your business finances at any single moment in time. Some of the benefits are lost if you wait too long to process the information. You’re also more likely to overlook expenses when time passes between spending and accounting for your cash. Though you’ll put forth some effort along the way, you’ll be on Easy Street come tax time, when your receipts and monthly expenditures are in good order.
Rely on Real-Time Reminders
Online calendars such as Google’s version are helpful for expense planning and tracking money. Not only can you set alerts to remind when recurring business expenses are due, but the payables can also be broken down by recipient, to better facilitate tracking. Mobile-ready calendars are easily managed on-the-go and the reference can be printed to verify expenses at tax time.
Document Business Travel Expenses
Claiming all your entitled deductions can make the difference between a hefty tax bill and an affordable cost of doing business. Big-ticket items such as plane tickets and accommodations are hard to miss, but it’s easy to overlook less substantial travel spending. Under professional circumstances, trips across town or lunch with an associate qualify as business expenses, which may be deductible.
Explore Business Software Solutions
Similar to its effect on other aspects of daily living, technology has made it easier to track business expenses. Finance software can help you analyze business spending, at the same time streamlining your organization’s financial accountability. And it’s easy to link all your business banking activities with money management tools, saving time and adding convenience to commercial money management.
Business News Daily recently ranked small business accounting software, recommending a few favorites.
- Zoho Books – Aimed at extra-small businesses, Zoho provides the basic tools small ventures need to compete. Beyond its bare bones structure, Zoho also has integrations, for future adaptation, as your business accounting needs evolve. Advanced features include time trackers and project billing tools to increase invoicing efficiency.
- QuickBooks Online – Among the most familiar names in small business accounting, Intuit’s online offering is extremely popular with small business owners – particularly those who cut their teeth on earlier versions of the time-tested platform. The feature-rich suite includes several time-savers for business owners, and a simple, easy-to-master interface. QuickBooks adapts well to businesses of all sizes and provides universal benefits to commercial ventures operating in diverse industries.
- FreshBooks – Each accounting software provider sets itself apart with unique ways to buoy business accounting. In addition to a full array of accounting aids, FreshBooks makes its mark with its advanced, yet intuitive custom invoicing capabilities.
- Xero – Rated highly among Mac users, Xero competes with sometimes superior Windows small business accounting alternatives. The cloud-based software saves time and integrates with more than 700 apps. You won’t miss a step with the full-featured solution, or compromise ease of use, just because you’re a Mac user. Xero is also available for Windows.
Closely tracking business expenses keeps your eye on the ball, helping you build a butter business. It’s also a great way to keep your accounting current, on the way to tax season. Monitoring expenses year-round hedges against unexpected financial surprises and helps you make incremental gains, when money’s available to invest and expand. If you’re not tracking expenses, who’s looking out for your best interests?
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