Updated: Sep 8, 2020
One of the most common questions I get as a bookkeeper is, "how do I track my expenses easily?" While there is no magic button on your smart phone that we, as accounting professionals, can tell you to push for that answer, (wouldn't that be AWESOME), here are some tips that can help you find the perfect solution for you.
1. Be realistic with yourself about what you are willing to do and what fits with your lifestyle. This may sound strange, but if you choose a method to track your expenses on a spreadsheet that is on your home computer and you spend most of your day out in the field, this may not be the best method for you.
2. Paper vs digital. Are you a person who is more apt to keep a paper log of your business expenses or a digital log? Both have advantages and disadvantages. A paper and pencil is never going to crash. However, it is not convenient for most people. Digital is more convenient and can even be on your smart phone (still not a magic button). Some apps even have the convenience of scanning your receipt, so you don't have to input your expense. (I do suggest you keep paper receipts at least until after you file your taxes, if not the standard 7 years for IRS requirements.)
3. Using a phone app that is connected to your actual accounting program is a huge plus. This way you remove another step to your routine. This also creates less availability for you to make an error while inputting your expenses. I mean, you could just scan or take a picture of your receipt and have a digital copy for your files, but why not automate the process and have that expense go right into your accounting program.
4. Keep a specific place in your vehicle to keep paper receipts until you can get to your office and file them. This is so easy to do by just having an envelope labeled "Business Receipts" in your glove box or in your purse, bag, briefcase, wherever. Be sure to keep that envelope or whatever you choose to use in the same place. You will always know where to find it.
5. Be consistent and make it a habit to keep and store your receipts for easy access. In your office, have one place for all your expenses. Some of my clients use binders, other clients use accordion files and yet other clients use a box (not my favorite storage).
6. Yes, an Excel spreadsheet can work. I have been asked by businesses owners that have a few expenses and income to track if an Excel is a viable option. I would say if you are in this category, it can be. While you are keeping track of expenses this way, you are not running them through an actual accounting program. This means there will be a little more work for you, your bookkeeper, CPA or tax professional when the time comes for you to prove your income and expenses. Just be prepared for the work or the expense.
7. If you keep digital copies of your receipts, make a specific folder for keeping those files. I suggest you use a cloud-based filing system (like OneDrive or Dropbox) or make a backup file regularly with an external hard drive. Again, it's important to keep your files safe
Next week, I will share some standard expenses you should track for your business. In the mean time, if you have any questions, please contact me at Rebecca@rhbizsolutions.com
Here's To Your Success!
RH Business Solutions