Tracking expenses: How to keep track of business spending
What are business expenses?
Business expenses are costs you incur to run your business, such as payments you make for advertising, office supplies, software subscriptions and more.
Why track business expenses?
Tracking expenses is essential because it helps you keep tabs on how much money you spend and where it’s going.
It’s also helpful for budgeting and filing taxes, making it easier to:
find areas where you can save money
plan for future growth and expansion.
3 ways to track expenses
1. Use accounting software
Accounting software is an invaluable resource if you’re looking for a streamlined way to input, track and analyse expenses.
Most accounting software programs connect with your bank account. If you’re a sole trader, the Australian Tax Office (ATO) has an app called myDeductions, which you can use to track expenses and other tax information.
Before selecting accounting software, ensure it complies with Standard Business Reporting (SBR).
Accounting software or a full-scale business management platform is the most comprehensive way to track your spending as well as manage other business-critical processes as your business grows and evolves.
2. Use a spreadsheet
Tracking expenses in Excel or other spreadsheet programs like Google Sheets allows you to input data and update it continuously. You can also use formulas to analyse and compare expenditures.
When creating a spreadsheet for tracking business expenses, it’s important to include entries for:
You may also want to include relevant notes about each expense for your own records, such as who paid for the product or service and why you bought it.
It’s important to note this process can get very time consuming as your business grows, and tasks may duplicate leading to time inefficiencies, human error and more.
3. Keep paper records
When tracking business expenses, record the date, item (or store name), and amount of the purchase. You can track your transactions as they occur or total up your receipts later.
This method of expense tracking will quickly be outgrown as your business develops and you find yourself handling more complex payments and business-related expenses. It’s important to note that keeping your receipts manually on-hand can be difficult to manage, leading to lost or missed expenses, data errors and time inefficiencies.
Tracking expenses: why automate?
Increase accuracy and reduce errors
In accounting, manual data entry can lead to mistakes that can throw out your books. And correcting errors can be time-consuming and, therefore, costly to the business.
Automating expense tracking takes human error out of the picture, ensuring your financial records are accurate by detecting data entry errors and flagging duplicate entries.
A digitised and automated system provides real-time visibility into your business’ financial health, allowing you to identify trends and improve forecasting. If you’re tracking expenses manually, it’s easier for things to get missed.
With an automated system, you can easily monitor expenses and streamline invoicing, payments and reports. This is especially helpful if your business has multiple departments or locations.
4 steps to tracking expenses
1. Set up an expense tracking system
Consider your business’ size and complexity when deciding which system is best for tracking expenses. Also, consider the system’s cost and user-friendliness to determine how effectively it’ll help you meet your goals.
2. Update the system regularly
Once you have chosen a system, update it regularly. This means regularly inputting data, adding new vendors and setting reminders for when payments are due.
3. Monitor spending trends
Monitor spending trends to find areas where you can reduce expenses.
Also, check for any discrepancies and unusual spending patterns.
4. Analyse the data
Once you have collected the data, it’s time to analyse it.
Use the information to assess profitability and improve spending habits.
More expense tracking tips for businesses
Set up a budget and stick to it
A budget helps to prevent you from overspending. Set a weekly or monthly limit for expenses.
Separate personal and business expenses
When tracking expenses, keeping business and personal expenses separate is essential. This will help you remain organised and minimise confusion when filing taxes.
Track all expenses
Small expenses add up, and some may help you qualify for tax deductions — as long as you have receipts - so make sure you track all your expenses.
Invest in software to help organise your finances and drive success
Bookkeeping or accounting software can help you manage your finances and provide insights into areas where you can reduce or eliminate expenses.
This information shouldn't replace the advice of a professional. If you need help with your business finances, find an accountant or bookkeeper near you who can provide qualified guidance.
Accurate record keeping with MYOB
Tax time needn’t be taxing. With MYOB’s cloud-based accounting software, it’s easy to capture expenses on the go. This means you have an accurate view of your business cashflow while also having all your records safely stored and backed up in the cloud. At tax time you can invite your accountant or bookkeeper to your software, so you can be sure you claim everything you’re entitled to. Try MYOB FREE for 30 days today.