Tracking business expenses can be tedious and time-consuming, especially if you have to manually sort through a pileup of receipts and statements. Even in today’s digitally driven world, a surprising number of small businesses rely on a manual process for entering business expenses.
Nearly two-thirds (64%) of small businesses with fewer than 100 employees still use some form of manual process to manage expense reporting (pen and paper, Excel spreadsheets or a homegrown system), according to an expense management trends report. Forty percent of small business respondents said that their biggest pain point in the process is the time it takes to reconcile and review expense reports.*
If you find yourself in the same situation, consider streamlining your business expense tracking with the following steps.
Step 1: Explore Digital Solutions
Making a shift from manual tracking to an automated system can help you stay up to speed in today’s increasingly digital environment. Cloud-based accounting software such as QuickBooks™ and FreshBooks® offer flexibility and simplicity because everything is online and there’s no need for version upgrades or system maintenance. With a cloud-based system, it’s easy for you and your employees to enter expenses and view real-time data from any device with an internet connection. When you’re selecting the right accounting software for your business, consider how automation could improve your workflow and who should be involved in implementation. In addition to comparing the cost of various platforms, be sure to explore how they integrate with HR and finance systems as well as accessibility features (e.g., mobile applications).
Step 2: Organize Business Expense Records
Staying on top of recordkeeping can help you improve efficiency whether you’re using a manual or automated process, or a combination of both. It all starts with having a designated workflow for recording all business-related purchases. For paper receipts, snap a picture and enter them into your accounting software or save the files electronically. Using a business debit or credit card can make it easier to track and categorize your business expenses digitally.
Step 3: Manage Tax-Deductible Expenses
It pays to find out which expenses may be tax-deductible for your business. The following are a few common tax-deductible expenses, and you should consult with your tax advisor for a complete list of business deductions:
• Business equipment — purchasing a qualified asset (buildings, machinery, furniture or other capital expenses) may qualify for a Section 179 deduction.
• Business travel and entertainment expenses — generally, you can deduct 50 percent of meal expenses and 100 percent of lodging provided to employees if certain conditions are met.
• Vehicle expenses — if you use your car in your business, you may be able to deduct car expenses using standard mileage rates, which are updated every year.
We’re Here to Help
Use a business checking account to keep business income and expenses separate from your personal finances. For more ideas to help you make your business a success, contact a member of our lending team for an appointment.
This financial institution does not give tax advice. Consult your tax advisor for information specific to your situation.
* Source: Certify, 2017 Expense Management Trends for Small Business