Why expense tracking is important for your business
Tracking expenses allows you to see how much money you spend on office supplies, travel, marketing campaigns, etc. This information can help you forecast and plan ahead by letting you know how much you have left in your budget at any given time. It can also help you identify areas where you can save money by switching providers or negotiating better rates with vendors.
Keeping track of your business expenses can also be helpful in the following ways:
The benefits of business expense tracking are massive. In addition, it can also help you stay both audit ready, and avoid fines from tax authorities for late filing.
What are the most common types of business expenses to track?
SMBs or large enterprises can track many different types of expenses. And some of the most common are as follows:
- Office equipment costs
- Marketing and advertising
- Payroll expenses
- Insurance premiums
- Employee training and development
- Travel, meal, and entertainment expenses
- Depreciation fees
- Rent or mortgage and utility expenses
- Legal fees
All of the above items are crucial to track as they can add up quickly over time and may qualify as deductible business expenses (if used directly for your work activities).
What is the best way to track business expenses?
1. Assess and categorize your expenses regularly
Understanding your regular spend will give you a better idea of where your money goes, which makes it easier to manage your budget throughout the year. Keep a running list of all your regular expenses, such as SaaS subscriptions, business travel spend, external agency spend, and more.
Some categories are more expensive than others (and maybe even duplicated) if you implement a cross-company CRM for example.
Spend management solutions like Payhawk take all of the manual efforts out of expense tracking, with company cards (and controls) and expense management software, all in one place. It also helps you track your budgets and see your spend in real time (even across multiple entities).
2. Digitize your receipts
OCR data capture pulls all the necessary info from your receipts and invoices. At Payhawk, we let you do this via your phone or tablet's camera so you can log them in the app and categorize them in seconds using fields set by your business.
The data pulled follows the accruals concept and flows straight into your chosen accounting software or ERP, including Quickbooks, Xero, NetSuite, and more. This data flow can save your company hours and even days in manually reconciling and fixing errors, giving an impactful real-time view of spend and cash flow.
Payhawk is one of many options available that offer multiple spend management features and benefits. Our solution lets you submit receipts in seconds and automatically pulls out all the relevant data.
What's more, our accounting and ERP integrations make bank reconciliation seamless, with zero errors and tonnes of time saved on manual admin via clever automation. Our low FX fees, multi-entity management, multi-lingual customer team, and direct integrations make us one of the best options for global and growing businesses.
What is an expense tracker app?
An expense tracker is an application that helps you track, record, and manage your expenses. Some of them also allow you to categorize expenses and set budgets.
There are tonnes of different apps available, including some with simple interfaces and some with more advanced features such as graphs and charts with statistics.
Payhawk, for example, acts as an expense app while also offering full spend control, subscription management, AP, and more.
What to look for in an expense tracker?
The first thing you should look at when choosing a business expense tracker is the features it offers. Some features might be more important to you than others, so make sure that the app has all the features you need before implementing it! You should also check if there are any limits or restrictions on certain features (like tracking only a limited number of employee expenses, etc.).
To make sure that you get exactly what you need from a business expense tracking app, you should also consider if it has/let you:
The best expense-tracking software should be easy to navigate and use. It should also allow users to enter data in real-time with minimal fuss.
Tracking income and expenses
You need to be able to input all your spending as well as your income from different sources, like sales and events. It's also essential to be able to track recurring payments like rent or utilities, as well as non-recurring payments like client fees or business equipment purchases.
Look for an app that seamlessly connects with your ERP or accounting software, so you don't have to enter each transaction manually. This makes logging expenses much faster and easier since they're automatically added as they happen without any extra effort on your part except for approving them.
Capturing and organizing receipts
If you want to keep track of every penny spent, you'll want an expense management app that lets you scan receipts and pull out all of the data with minimum effort. It's even better if the same app is connected to card spend to join every action.
Organising tax deductions
Expense tracking software allows users to capture all of their receipt data and accurately categorize their expenses. This will enable them to reclaim VAT in the future without issues due to big gaps in info. Payhawk customer ATU for example managed to save +2m euros by switching to digital expense management and leaving paper receipts behind.
A good expense tracker will give you access to a variety of different reports so that you can see how much money has been spent in each category over time, as well as how much was spent compared with previous months or years. Also, look for an expense tracker that lets you run custom reports by date, location, and so on.
Providing secure access
If you're sharing an expense tracker with multiple employees or partners, ensure the information stays secure by implementing two-factor authentication (2FA) measures. Or by using HTTPS encryption when accessing the dashboard remotely, along with other precautions.
A better approach to effective company expense tracking
Getting caught up in the day-to-day demands of running your company can be challenging, but you must remember the processes that keep your company running smoothly. And while expense tracking may not be the most glamorous part of accounting, that doesn't mean it should be treated lightly.
SMBs can use their expense tracking systems to identify areas where they can improve their profitability by cutting costs or increasing revenue.
Large corporations can also use them to ensure that spending is within budget and that employees follow company policies for reimbursing expenses, such as mileage reimbursement rates and travel expenses.
The best way to create an effective expense-tracking process is by using software that integrates with your existing accounting system. These integrations allow you to track every transaction in one place instead of pulling data manually from multiple applications and incurring annoying delays.
Discover the best way to implement expense tracking that integrates with your existing accounting systems; book a demo today.