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A Guide on How to Keep Track of Profits and Expenses Part 2

Managing finances is an essential part of running a successful business. Keeping track of profits and expenses is a key part of financial management and is essential to ensure that a business runs efficiently and profitably.


Part 2 of this guide will focus on how to keep track of your business's expenses. We will discuss the different categories of business expenses and provide tips for keeping accurate records.


Tracking Expenses


Keeping tabs on expenses associated with running a business can appear daunting initially. However, understanding where to begin can help you stay organised and keep it that way.


  • Open a Business Bank Account


Creating a separate business bank account is a great way to separate your personal and business finances. Using this account exclusively for business expenses and income allows you to track all of your business-related financial transactions easily. This will help you stay organised and make it easier to reconcile your business' income and expenses with the bank statements. It will also make it simpler to manage your taxes since you have a clear breakdown of your business' financials.


  • Open a Business Credit Card


In addition to having business bank accounts, getting a business credit card is also a good idea. This can be a great way to cover your business expenses while building business credit. You can keep track of your expenses and reap cash-back rewards or other perks by paying off the monthly balance.


Categorising Business Expenses


Categorising business expenses can help your small business prepare for tax season, provide guidelines for staff spending, and adjust expenses as the company grows. This can be done by creating categories for expenses in accounting software that include advertising expenses, business vehicles, payroll, employee benefits, meals, office expenses, office supplies, professional services, rent, utilities and phone, travel expenses and sales tax. Budgeting for each category will also help to manage expenses.


Tracking Business Expenses by Client


Keeping an eye on which clients cost the most money to do business with is essential. You can determine the most costly customers by tracking your expenses and analysing the data. This could involve clients demanding too much of your time or demanding discounts and other concessions. The data can help you decide which clients to focus on in the future and strategise how best to handle their business. Additionally, you may have to consider changing your pricing structure or letting certain clients go to ensure your small business stays in the red.


Considerations to Take When Tracking Expenses


You can stay on top of your business expenses and maximise your tax savings with the help of accounting software or expense-tracking apps. These solutions make it easy to keep track of expenditures by connecting to your bank accounts and asking whether every transaction is for personal or business use. Furthermore, accounting software can automate the process and enable you to store receipts and expense reports digitally. By taking advantage of these tools, you can ensure that you take advantage of all important deductions.


Conclusion


Tracking expenses and profits is an important aspect of running a successful business. It is necessary to create an effective system for tracking expenses and profits to ensure that the business remains on track financially. Business owners should ensure that they are regularly aware of their expenses and profits and take measures to manage both efficiently, as detailed in Parts 1 and 2 of this blog.


An effective budgeting system, software, tracking tools, and staying informed about the business's financial health are crucial. All this help ensure the business is profitable and can continue to grow and succeed.


The ECommerce Accountant is a business advisor for online stores and influencers in Australia. We are accountants and bookkeepers dedicated to helping online entrepreneurs minimise tax and increase profit. Your small business deserves exemplary accounting service, which we provide. If you need an accountant for an ECommerce business, we’ve got you covered! Get in touch with us today and let us know how we can help!

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