Are you aware of how much money you make in your business and how it’s spent? If you find yourself worried about the slow or absent growth of your business despite increased sales and you can’t tell how the money was spent, you are not alone.
Many business owners have once felt frustrated at being unable to account for money invested into their business. However, if you want to grow your business you need to separate personal needs from your business and learn how to track your business expenses.
This article explains why you should track your business expenses and how to automate expense tracking for the growth of your business.
3 Benefits Of Tracking Business Expenses
The difference between a business that becomes profitable and the one that’s cut short is the business owner’s commitment to record-keeping. According to Failory, 2 out of 10 new businesses fail in the first year of operations. The common thread in business failure reports is business owners who overestimate the cash flow in their business. Keeping track of your expenses gives you a firm idea of the current financial health of your business and what the next step to take in your business should be. Here are the benefits of tracking business expenses:
It Helps You Manage Cash Flow
When you are uncertain of cash flow in your business, you can’t accurately project business growth. Certain expenses are easy to ignore but end up affecting your bottom line. For example, if you run an eCommerce store you need internet access to stay on top of business activities. From uploading product images to responding to customer’s feedback, it requires that you stay online. Now, what if you assume that your internet costs are N10,000 while in truth, you actually spend over N30,000 a month? That’s N20,000 that won’t be accounted for!
Let’s go further.
If your recorded profit for the month by your calculations is N100,000, what you truly made is N80,000. That is if your internet costs are the only expenses you didn’t record. It’s very easy to neglect the ‘tiny’ expenses in business, especially the ones we incur on the go. When you have a system to record these expenses, you get a birds-eye view of where your money is going and areas where you can save costs.
It Opens You Up To Investment Opportunities
Every business owner wants to scale at some point. This can only happen if you can prove to potential investors that you can guarantee a return-on-investment based on your current business metrics. You can’t create a pitch without including your financial projections. If your business is operating, your financial projections will be drawn from current metrics.
Don’t assume your business is too small for investors, opportunities come up every day. Maybe you don’t intend to be on Shark Tank, what about when you need a loan from family or friends to scale operations?
In addition, financiers will require your business records to verify that your business is creditworthy.
It Helps You Forecast Business Growth
Knowing your business’s financial health gives you a deeper understanding of what’s working and what’s not, allowing you to make more informed decisions. If you are having business challenges, tracking your records – income and expenses- can help you save your business before it gets into murky waters. You can quickly see which expenses need to be cut or increased to make you more profitable.
Read – Why Your Small Business Needs a Separate Bank Account.
How To Track Business Expenses
Despite knowing the benefits of tracking business expenses, you might feel like it’s an overwhelming task. The traditional method of tracking business records involves writing them manually. The risks of using this method include but are not limited to loss of financial records. It’s also inefficient and cost-intensive. You could also forget some of the expenses made no matter the size of your business.
Tracking business expenses can be done easier and more conveniently with Simplebks.
Review Statements Weekly And/Or Monthly
As an entrepreneur, you should know that data is the lifeblood of your business. With access to your records, you can make informed decisions about your business. You can tell when it’s okay to hire new staff, if you need to increase the purchase of a certain product or if there’s an expense you can cut down.
Tracking your business expenses makes you manage cash flow better and stay financially aware. With your records stored online, you can auto-generate reports on Simplebks. Your records are accessible to you from anywhere in the world.
Accounting Made Easy! 💛
Writer’s Recommendation: Why You Should Track Your Business Expenses Daily.
Osasogie Omoigui