Are You Tracking Your Business Expenses the Right Way?
For anyone running a field service business, it is common knowledge how complex the day-to-day operations can be. It is said that a field service operation consists of a thousand small things to look after, and naturally, so are their costs. If you want to maintain your profit margin, you need to be mindful of every penny spent out of your pocket. But that could be rather hectic. You might easily get caught up in the day-to-day operations of your business and forget to keep track of all business expenses. Not to mention the risks of manual errors if you are doing things on your own. This is exactly what a business expense tracker can help you with.
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In fact, it is a proven fact that the best way to track your business expenses today is by using expense tracking software. If you are not aware of this cutting-edge digital tool yet, you have reached the right place. In this blog, you will learn how this innovative, powerful, yet simple software can streamline your expense tracking and boost profitability. In the sections ahead, we will elaborate on how this software works, its importance in managing your day-to-day expenses, and, most importantly, how to track business expenses in the most efficient manner.
So, if you want insight into market best practices, read on!
Table of Contents
Business Expenses: Know More about the Most Crucial Component of Your Business
Before we go about singing high praise for business expense trackers, let’s start with the basics to understand their significance better. To this end, first we’d like to clarify what business expenses are.
In simple terms, business expenses are typically the costs incurred in the day-to-day processes of a business. It is one of the most critical components of your business, since this is what ultimately determines your profit. Also known as business deductions, these costs are subtracted from your total revenue to calculate your profits, losses, and taxable income. As such, business expenses entail almost all kinds of costs that you pay for in your business. Some of the most prominent ones include:
- Labor charge
- Equipment rental
- Office rent
- Advertising and marketing costs
- Bank fees and interest
- Office supplies
- Software subscriptions
- Postage and delivery
- Legal fees
- Repair and maintenance costs
- Business phone and internet costs
Keeping track of business expenses allows you to monitor profits and losses. If you don’t track your expenses, you can never know how much you are earning versus how much you are spending. It will also help you analyze business trends that help you develop business forecasts. Also, you can make informed decisions about your finances and make smart choices about how to use your funds if you have a clear idea of how much money you have and where it goes. With this information, you can easily determine which jobs are profitable and also identify areas where you can cut costs going forward.
Moreover, when you produce proper documentation, the IRS will write off business expenses. As a result, keeping track of your business expenses will lower your organization’s taxable business income.
3 Steps to Tracking Business Expenses in the Right Way
We consulted finance experts and reviewed leading enterprises to learn the best method for tracking business expenses. Our research revealed three components that you must follow to adhere to the market best practices for business expense tracking.
- Open A Business Bank Account
- A separate business bank account for your business finances
- A business savings account
- A business credit card
- Store and Organize Receipts Properly
- Make a separate storage space to keep all your receipts
- Use file folders to organize your receipts on a weekly/monthly basis
- Set a specific time aside each day or week to file and organize the reciepts
- Use binders or plastic sleeves to separate the receipts by category and label them correctly
- Choose the Right Digital Tool for Tracking Business Expenses
The first step to transparent business expense tracking is to separate your business account from your personal bank account. Come tax season, it will be an impossible task to find the right business expense heads in the midst of grocery bills and rent receipts.
Having a separate business account will help you organize and track your business expenses without any confusion, or the worry of missing any tax or legal obligations. To this end, you’ll need to have the following:
To ensure accurate accounting and bookkeeping, all your receipts (physical and digital) need to be stored and filed correctly. This also ensures an accurate tax deduction. If you are dealing with physical receipts, you need to do the following:
As you can see, this involves a lot of work. It takes up not just a lot of your time but also a significant amount of storage space in your office. Yet, it does not guarantee complete accuracy. One single mistake can undo all your efforts to track the expenses correctly.
If that’s the case, then how to keep track of business expenses with complete transparency and accuracy?
The answer is digitization and automation. To avoid errors and inefficiencies, you can simply turn all your physical receipts into digital copies by scanning and uploading them to a designated location on your computer or even on the cloud. For example, the Field Promax mobile app lets you upload any document or image, including receipts, to your company’s central database from anywhere to ensure secure storage and efficient organization.
his brings us to the third and most important step of tracking business expenses.
When you ditch physical receipts and digitize your expense tracking, there are two methods you can follow to organize them– a simple spreadsheet or advanced accounting and business expense tracking software.
Most small businesses use MS Excel spreadsheets or Google Sheets to store, organize, and track their receipts. The reason for this choice is that it is free and familiar. However, this form of digitization still involves a lot of manual work. You will still need to manually enter every single expense detail, organize them in specific columns and categories, and manually search for a single document when you need it. Evidently, it is most likely that you forgot to add a receipt. And even if you don’t forget, you can’t ignore the chances of double entry.
The task becomes even more complicated when your business expands and your expenses grow. The sheer amount of data to be entered and organized makes it almost impossible to keep track of all your expenses correctly. This is why most businesses today are leaning towards business expense tracking software instead of simple spreadsheets.
Business Expense Tracking Software: How It Works
Essentially, a business expense tracker is a software application that automates the process of business expense tracking. It is often a cloud-based tool that records, stores, and organizes all your business expenses automatically so that you can get hold of the necessary data on-demand. Since it is cloud-based, your data is safe forever. Plus, it eliminates the risks of double entry and manual errors, ensuring accurate, transparent, and scalable expense tracking.
Most leading business expense tracking software integrates with popular accounting software, making your accounting and bookkeeping easier than ever.
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The Benefits of Business Expenses Tracking Software
Tracking your business is vital since it allows you to understand exactly how it is performing. You can assess your finances to determine where to invest and when to hold back. Unfortunately, tracking expenses can sometimes feel like a lot of extra work. No matter how much we try to deny it, administrative tasks are not exactly our favorites! But it is unavoidable and necessary.
If you are going about managing expenses using a manual, pen-and-paper method, the task is bound to get hectic. On any given day, a field service company spends a lot of money on different things—labor charges, equipment rental, office supplies, parts procurement, and so on. If you miss one single item, it is going to add up and jeopardize your books at some point. Moreover, a person can only remember so much! There is no guarantee that you are getting every little detail about the expenses made on the field from your technicians. It is more than possible that some little details slip through the cracks when they report back to you at the end of the day.
Even if you use digital copies and spreadsheets to track expenses, you are not out of the woods in terms of accuracy and transparency. As we have explained above, using spreadsheets is just another form of manual data entry that involves a myriad of risks when it comes to business expense tracking.
The most efficient way to avoid such risks is to automate your expense tracking. And this is what the business expense tracker does for you. In fact, it has more benefits than just storing and organizing receipts.
- Organized Bookkeeping: Accurate financial statements mean you’re ready for anything—tax time, an IRS audit, or applying for finance.
- Clarity in Expenditure: You can more easily assess where business expenses can be reduced to improve your cash flow.
- Better Financial Planning and Forecasting: By looking at your expenses and running reports to spot trends like overspending, you can make adjustments and plan accordingly.
- Tax Savings: Many small business expenses are tax deductible and can reduce your taxable income. When you’ve tracked your expenses diligently, you’ll have evidence to support any claim for tax deductions right there in your financial records when tax season comes around.
- Spotting Fraud: When you keep an eye on your expenses, it’s easier to root out any financial fraud.
Wrapping Up: Best Business Tracker for Small Companies
To sum up the discussion, it is evident that the best way is to combine and leverage the power of digitalization and automation. In simpler terms, if you are using a business expense tracker to track your expenses, you are doing it right. But if you are not, you are facing some serious risks that may affect your cash flow, profitability, and even business growth. Not only that, you may also face severe difficulties in terms of tax deduction and compliance. So, if you have yet to sign up for one, your time is now!
With that said, the best small business expense tracking software today is Field Promax. It is a paperless business software equipped with high-end tools and capabilities to automate your business processes. It efficiently streamlines your workflow, keeping track of every single financial record from the first estimate to the final invoice. It organizes every document based on different work orders so that you never mix up any files. Since it is cloud-based, you can update or access your documents from anywhere, never having to wait to report a receipt until you return to the office. Plus, cloud storage secures data safety and frees up space in your office—talk about convenience!
The best part of Field Promax is its ease of use and simple interface. Despite so many advanced features and high-end technologies, it has almost zero learning curve. Besides, it is surprisingly affordable, with a flexible pricing plan to suit your growing business needs. And it supports integration with both QuickBooks Online and Desktop.
What more can you possibly ask for from a business expense tracker? So hurry up and sign up for Field Promax today!
For more information,contact Field Promax today.