Entrepreneurs and small business owners have to keep track of a wide variety of expenses, including rent, equipment, furniture, inventory, salaries, licenses, marketing, and insurance.
While the exact nature of the expenses can vary slightly depending on the type of business you own, keeping track of your business expenses is a must for effective financial management. Proper expense tracking will also help you file accurate tax returns and maximize deductions during tax season.
Thankfully, a number of affordable and high-quality business expense trackers are now available to help you accomplish this task in a quick and efficient manner.
Let’s learn a bit more about what they are, how they can help your business, and what factors you should consider before choosing the right expense tracker to meet your business needs.
What is a Business Expense Tracker?
A business expense tracker is simply an app or software tool that helps businesses track, record, and manage their expenses for future reference. If you’re an entrepreneur or a small business owner, then investing in a reliable business expense tracker will help you simplify your finances to a great extent.
It will help you organize all your regular expenses into categories, keep track of receipts, and integrate seamlessly with your chosen accounting software. It’ll also keep your operations from going over budget, allowing you to cut back on spending whenever necessary since you’ll have a detailed understanding of where your money is going every month.
Depending on the features you need, the cost of a high-quality business expense tracker could range from free to over $100 per month.
How Does a Business Expense Tracker Work?
A business expense tracker works through a series of simple steps, which are as follows:
- To make the most of your expense tracker, you’ll need to input all your expenses over a given period of time, such as a month or a quarter. This can be done either manually or automatically (through an integration with your accounting software or business bank account).
- Once you’ve inputted all your expenses into the tracker, you’ll need to separate them into various categories like marketing, inventory, travel, utilities, or office supplies.
- This will allow the business expense tracker to keep track of all the money spent in a given category. As a result, the tracker will help you monitor the spending patterns in your business, enabling you to maximize efficiency and prevent overspending in any category.
- A high-quality expense tracker can generate reports and analyses summarizing the expenses of your business over a given month or year. These reports can be used for budgeting, tax filing, and to increase the efficiency of your business operations.
Most business expense trackers can be accessed either through an app or a website (for desktop users). To use one, you’ll typically need to create an account, either for yourself or for your entire team or department.
Does a Small Business Need a Business Expense Tracker?
As a small business owner, you can benefit immensely from investing in a high-quality business expense tracker. It’ll allow you to keep track of the expenses incurred by your employees and the reimbursements they’re owed.
Small business owners often have to wear many hats at the same time, working on everything from marketing to accounting for their growing business. This can leave them with little time to focus on cash flow, which may lead to overspending.
A reliable expense tracker app will help prevent such overspending through consistent updates about all the money coming in and going out of your business bank account so that you can always stay within your budget and remind your employees to do the same.
A business expense tracker also makes it easier for small business owners to efficiently file their tax returns and plan for future growth.
Up-to-date records of all business expenses incurred during a certain financial year – as well as the ability to generate reports separating the expenses into neat categories – makes the process of filing tax returns and claiming deductions much less time-consuming.
A business expense tracker will also help you better understand your cash flow. This will allow you to identify areas where you can reduce your expenses as well as areas where you can invest more to accelerate the growth of your business – either by attracting more customers or better serving your existing customers.
Reasons to Have a Business Expense Tracker
For small business owners working with a lean budget, a reliable business expense tracker app could make a difference of tens of thousands of dollars every year. Here are the three most important reasons why you should consider getting one for your own business.
- Taxation: An expense tracker app will reduce the amount of time wasted on sorting receipts and wading through piles of paperwork come tax season. It’ll also make life easier for your accountant, providing them with detailed documentation regarding all your business expenses throughout the year. This will make it easier for them to identify which expenses are tax deductible, thus saving your business hundreds (if not thousands) of dollars in taxes every year.
- Employee Satisfaction: The best business expense trackers allow employees to upload receipts through the app and have reimbursements deposited directly into their bank accounts with minimal delays. Hence, employees will no longer have to jump through hoops and wait weeks just to get reimbursed for the expenses they’ve incurred while on duty. This will, in turn, boost morale, reduce employee turnover, and help you save money on hiring and training new employees.
- Business Strategy: A reliable business expense tracker will provide you with real-time updates of every expense incurred in your business, automatically analyze recent spending trends, generate detailed expense reports, and integrate seamlessly with your accounting software. This level of insight into the financial standing of your business – at any given time – can help you make more strategic decisions about purchases, marketing campaigns, workforce expansion, etc., allowing you to allocate the limited resources of your business better.
How to Choose a Business Expense Tracker?
To enjoy all the benefits mentioned above, however, you’ll need to choose an expense tracker that is well-suited to the needs of your business. Here are a few of the features and capabilities you should look for when making your choice:
Automated Expense Tracking
To ensure that all your business expenses are accurately recorded and accounted for as and when they take place, your expense tracker app should automatically import transactions from your invoicing software, business credit cards, mobile wallets, as well as your business bank account. An app that constantly monitors your spending – without the need for human intervention – will ensure that your business is able to maintain a healthy cash flow at all times.
Auto-categorization Function
Correctly categorizing your business expenses under different headings, such as marketing, inventory, salaries, utilities, and equipment, will help you file taxes and claim deductions more efficiently. However, the process of inputting and categorizing each expense manually can be very tedious and time-consuming. Therefore, you should look for a business expense tracker that offers auto-categorization tools that are intuitive and easy to use.
Receipt Capture
Your chosen expense tracker app should automatically capture and record the receipt every time you (or any of your employees) make or receive a payment on behalf of your business. The app should then place all of the receipts under the appropriate category and store them in the cloud for easy access. Such a receipt-tracking and capturing feature can be particularly useful if your employees are regularly required to travel for business since it will enhance the accuracy and efficiency of the employee expense reimbursement process.
Powerful Reporting Capability
Your chosen expense tracker app should be able to automatically generate expense reports, profit and loss statements, and inventory reports. Creating these reports manually can be extremely time-consuming and prone to human error. One of the major benefits of a business expense tracker, therefore, is that it can automate this process, enhancing its speed and minimizing the risk of errors. Ideally, the expense tracker app should also allow you to customize these reports in accordance with your business and budgeting needs.
Business Insights Reports
The best expense tracker apps come with powerful analytics features. They can integrate easily with other financial management tools (such as your accounting and invoicing software), which gives them access to all the relevant financial data. This data is then used to produce custom reports, analyses, and insights – comprising graphs and visuals – that are both informative and easy to understand. These insights can help you understand how well your business is doing financially, predict future revenue and expenses, and make better, more informed decisions overall.
Payment and Invoice Management
Some expense tracker apps also offer invoice management and payment processing features. For instance, the right app may allow you to accept payments via credit/debit cards and net banking. It will also enable you to track your invoices, automatically matching the payments received to the amount due on a given invoice and sending payment reminders as and when required.
Seamless Business Integrations
A reliable and high-quality business expense tracker should offer seamless integrations with various financial tools such as receipt scanners, accounting software, and payment gateways. This will ensure that you don’t have to spend hours transferring the relevant financial data from one program to another. In addition, easy integrations with various financial tools will help enhance accuracy while eliminating the need for manual data entry.
What Is the Best Way to Track Business Expenses for Free?
Now that you know what features to look for in your business expense tracker, it’s time to find one that is well suited to your business needs as well as your budget. If you’re a small business owner working with a tight budget, then you should consider using a free expense-tracking app, to begin with. Many paid apps also offer a free trial for beginners, while others offer the basic version of their app for free, with a fee charged for the premium version with more features.
Starting with a free trial or basic plan also allows you to check out the features and capabilities of an expense-tracking app without making a commitment. You can use the free trial to figure out which features are the most important to you and which ones are irrelevant to your business needs.
Once you fully understand your own needs as well as the capabilities of the various apps, you can pay for the expense tracking app that has all the features that can benefit your business.
