Spend money to make money… Nowhere is this expression more apt than when you’re running a business.
It’s impossible not to incur expenses in your company. From office rent and payroll to taxes and insurance, money is always leaving your company’s pockets.
But, do you have a clear picture of how much money your company is spending and what the money is being spent on? If you’re like most small business owners, you probably know the major expenses off the top of your head, and nothing much else.
That needs to change. Knowing all your company expenses is key to ensuring proper management of business finances.
Read on to learn how to stay on top of business expenses.
Do Not Mix Personal and Business Finances
Small business owners have a habit of using their personal checking accounts for business transactions. After all, with about 73 percent of small businesses being sole proprietorships, the proprietors have no legal obligation to operate separate business accounts.
Using one account might be more convenient and time-saving, but there are consequences. It’s hardly possible to keep track of company expenses. Just get your bank account statement for the past month and see how many business transactions you can identify.
When you open a separate commercial checking account, all your company transactions are in one place. It’s way easier to separate revenues from expenses.
Set Up a Company Expense Account
Opening a business bank account is a good start, but there’s more you can do. Open an expense account.
This is still a business account, only that it’s dedicated to expenses. However, for this account to serve its purpose, you must ensure all expenses are paid from the account. If you’re making payments from multiple company accounts, it will be difficult to stay on top of expenses.
Better yet, you can create accounts for different categories of expenses. For example, you can have an account for making office purchases and another for employee travel and entertainment.
If you’re worried about having too many company accounts, these virtual cards ease that worry.
Institute Adequate Expense Tracking Policies
Tracking expenses is easier when you’re in charge of making all company payments. As the company grows, however, there’ll be multiple people making payments, making tracking expenses harder.
This is why you need to create company policies aimed at making expense tracking easy. For instance, make it mandatory for all employees who spend company money to report all the expenses to your bookkeeper.
If payment is made in cash, the employee should file a copy of the receipt. Most accounting software provides the tools your organization needs to digitize receipts and record expenses.
Monitor Company Expenses the Easy Way
For any business to make a profit, revenues have to be greater than expenses. Monitoring company expenses enables you to not only know how much you’re spending but also find ways to cut costs and save money. Use these strategies to keep an eye on every cent your company spends.
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