Do you suffer from numerophobia, the fear of numbers, when it comes to your business? Keeping track of your business expenses is critical. But how can you do it? Here are four ways to keep track of your business expenses.
1. Open up a business bank account
The easiest way to keep track of your business expenses is to open up a separate business bank account. This will ensure that you keep your personal and business expenses separate. You should also consider opening a savings account to put money away for your taxes so that you will be able to pay them when the time comes.
2. Create a filing system for your receipts
It is important to create a filing system to store your receipts. The divisions in your filing system should correspond with the needs of your business. Some of the basic files you will need are entertainment, vehicle and transport costs, office equipment, and telephone and mobile costs. These receipts could be kept in a file on your computer, in cloud-based storage or they can be stored in a physical location. Keeping a physical record of your receipts would be helpful in the event that your data gets corrupted or destroyed. You should also create a digital back-up of your receipts.
3. Keep an accurate travel log
It is important to keep an accurate log of your travel expenses if you want to claim it as a deduction against your taxes. The first step is to write down the odometer reading of your car on the 1st of March each year. This is the first day of the tax year for individuals. You will also need to keep a record of your odometer reading on the last day of February the following year. In addition, you will need to keep a logbook of the kilometres you did for business. You can write it down in a physical logbook as supplied by SARS or you can use a mileage app. It is important when choosing a mileage app to track your routes that you can keep track of the following information: date of travel, kilometres travelled, and the details of the trip (where you went to and the reason for the trip). One thing to remember is that your daily commute to the office is not deductible. This is considered a private travel expense.
4. Keep an accurate record of your other expenses
If you have physical receipts, you can scan them in with an expense tracking app. Most accounting platforms have receipt tracking apps, like Wave or Quickbooks. When you capture the receipts, it is also important to make note of the following information:
Entertainment or meal receipts: You need to keep track of the reason for the meeting and who attended the outing or meal.
Business travel receipts: It is critical to keep track of the expenses you make when you go out of town for business. You should keep a note of what the business travel was for. Was it a conference or did you go to see potential suppliers?
Gift receipts: It is important to remember if you attended the event with your business partner or clients. In this case, the event should be documented under entertainment but if you give the tickets to the event to your client and they go to the event without you then it is a gift. You should also keep track of who and why you gave the gift to them.
Office expense receipts: These will be receipts for any equipment or stationery you use to run your business effectively. It can also be for furniture you have bought for your business.
By keeping an accurate record of your expenses, you will see where your money is going and be able to cut back on non-essential expenses.
Proudly brought to you by the NSBC.