Running a small business means you and your fellow directors wear many hats. And that means keeping track of business expenses can slip when you’ve got lots of jobs to do.
Many business owners are so busy chasing payments and shoring up the sales pipeline that tracking expenditure takes a back seat. And that means it’s easy to lose track of spending.
Misplacing receipts and other paperwork is quite simple to do, especially when receipts are loosely kept in wallets. And when you’re not monitoring expenditure, you can spend more than you realise. You won’t find out until you suddenly get a letter from your bank telling you you’re at your overdraft limit.
But taking some simple steps not only makes life easier, it means you can keep track of every penny. So here are out tips to help you smash it when you have to manage business expenses.
Types of expenses
There are three main types of expenses that businesses incur.
Operating expenses. These are generally divided into ‘selling, general and admin’ (SG&A) expenses and ‘cost of goods’ (COGS) sold.
SG&A are usually overheads and are non-production costs. They include:
- Utility bills
- Telephone bills
- Travelling expenses
COGS are related to the production level of the business and include:
- Direct material costs
- Shipping charges
- Direct labour costs
- Storage
Non-operating expenses. These costs are not related to the core operation of your business and are often overlooked. These include:
- Interest on finance
- Losses when disposing assets
- Obsolete inventory charges
Capital expenses. Often known as CAPEX, these are the expenses incurred when acquiring, maintaining or improving fixed assets. For example:
- Buildings
- Machinery
- Land
- Vehicles
- Office equipment
5 ways to manage business expenses
1. Don’t go over budget
Having a budget and sticking to it sounds obvious but many small business owners neglect it. It keeps a track of your spending and is the only way to know if you’re over or even underspending. It also helps you ensure you’re not spending on the wrong items or services.
It’s a lot easier to budget if your records and financial statements are accurate and up to date. There are a number of ways you can do that, which we mention below.
2. Go digital
Paperwork is essential. Without records, you can’t prove where your expenditure was spent or where you can make savings. Choosing to scan your documents means they’re easy to locate and if they’re stored on a cloud, they can’t get lost or accidentally binned.
More businesses send digital invoices these days, too, so keeping track should be easy. Some outlets are happy to email receipts these days, so say ‘yes’ when they offer as it will be easier to track of your spending.
3. Automate receipt submissions
Once you’ve decided to go digital, make sure you instruct employees to use apps to scan their receipts with their smartphone. Get them into the habit of scanning receipts immediately. This also attaches to their expense accounts.
Automated systems allow you to review and pay expense claims instantly. You will also know your financial position in real time. And quick payment also means employees are much more likely to use smartphone scanning apps as prompt payment is a big incentive.
4. Use employee expense cards
Employee debit cards are a great alternative for your teams than asking them to pay and submit claims for reimbursement. They are better than traditional corporate cards as they have limits controlled by managers.
For employees who travel, attaching the card to their hotel accounts also means you access digital receipts and invoices easily.
For example, Premier Inn’s Business Booker allows you to set up an account with each employee and you attach separate card details for each individual. This allows you to not only monitor their spend, but access invoices whenever the person stays overnight on business. That means you don’t have to ask them to remember an invoice when they check out and you can monitor what was spent and where.
All this means it’s easier to keep track of what’s being spent and where.
5. Integrate expenses with software
With so much digital ‘paperwork’ generated by expenses, it makes sense to integrate it with accounting software. Platforms such as Xero mean you have the latest financial information at your fingertips. Most work in conjunction with expenses apps, so once a receipt is scanned it’s automatically inputted into your accounts system.
Not only does this mean you know what finance is available to spend, it also reduces the need to input data. And all that saves time and money!
Talk to an accountant
While the tips above are useful, don’t forget to speak to an accountant about your business expenses. We can help you set up your accounting software and help you understand your financial reports so you’re always on top of what’s being spent and what’s available to spend.
Contact us today if you need help to manage business expenses with a free discovery meeting.