If you want to know how to manage the expenses of your business. This article is for you, in this we will discuss everything related to the management of your business. We categorized the expenses mainly in two types which are:
It is the expenses of an individual other than business purposes. For example rent payments, student loans, health insurance, tuition, utilities, etc.
In Business expenses, there are the basic expenses that happen while you operate your business either it is a small institution or a large corporation. For example payroll, bank fees & interest, equipment rental, company car, etc.
There are the following things that need to manage business expenses:
- To track your business expenses, you need to use a technology-based expense tracker or you need to create a report.
- The recorded expenses help to pay taxes and decrease the amount of tax return.
- Our largest part of the tax return is based upon business expenses, That’s why it’s very important to keep records of our expenditure.
- The bookkeeper or accountants keeps detailed data of every transaction within the business. Because they can easily manage all your expenses, keeping and managing expense records efficiently will make the process much simpler.
Now, we will discuss how to manage business expenses:
Management of business expense records is not easy to maintain. To maintain the expenses we need a Bookkeeper or Accountant who can manage and maintain your expenses in their record.
If you want to track your business expenses, you need an accounting software service that tracks each and every record as well as gives you additional features to make it easy to maintain.
There are the following things that every institution or corporation need to record their expenses as well as help to pay taxes if you keep a record of every expense :
- Keeping the receipt of every expenditure for the long term.
- Types of records e.g. sales, purchase, payments, payroll, etc. should be maintained.
- Expenses should be categorized.
- You need to keep enough documents as proof to pay taxes.
- Use a Business bank account for business expenses.
- Using a Credit card for business expenses helps to track the expenses.
- Planning the budget of your business expenses.
- Manage the business expenses online software
Now, we will discuss the above points in detail on how to keep track of your expenses and keep a record of every expense that helps to calculate the taxes there are important points discussed below.
Duration of keeping expenditure receipt
Any owner of a limited company has to keep and maintain his business expense records for at least 6 years. It will be a bit easier for the self-employed. A sole trader must keep their records for at least 5 years after presenting the January 31 deadline of the appropriate tax year.
This longer-term is for the benefit of HM Revenue and Customs (HMRC) rather than you. HMRC may choose to have their accounts look over for up to six years in the past. Because if they call you, you will be able to show all the records for the support in between periods.
2.Record types for Business need to maintain
It totally depends on which type of business you are holding like Sole trader or limited company etc. and you need to be VAT registered. The record should have your bank and card statement in mind, checkbook, and deposit book stubs can help with this.
- Expenses and profits.
3.Keep Your Expenses Distinct
A business is successful and transparent when you put your expenses in different categories for personal we have to put in the personal expense category and for business, we have to put in the business expense category. This is why it will be easier to differentiate and reduce loss. Separating both the expenses helps to reduce taxes. Here you have kept your records accurate because it saves your time as well as stress.
Using a debit card or credit card will separate your expenses and makes it easier because you will not use business expenses from your personal account.
4.Keep a Sufficient Record of your Business Expenses
A business owner generally did this mistake. They think of keeping bank statements enough for the records. Like if a businessman purchased something through a credit card and he has to maintain his record for future references. Here he did the mistakes he thinks keeping the record of it is simple like showing the credit card statement, But it’s not like that, The Canada Revenue Agency (CRA) will never accept your credit card statement. If you will show, they will not accept it. And they can cancel your credit cheques as proof of expense claim.
To manage your record you must keep two points in your mind Always ask for a receipt and make a habit Whenever you shop it does not matter how small it is.To maintain your record you need documentation as well as put a label on it.While taking the receipt always look for some information on it, such as the kind of receipt and expenditure category.
5.Types of Business Receipt
There are 5 types of receipts by which you can maintain and categorize your expenses.
- Foods & Entertainment Receipt
If you have ever conducted a business meeting in a restaurant. Then you have to maintain the record in business expense.
- Business Travel
If you are traveling anywhere around the world for business purposes. Then you have to keep the relevant receipt. If IRS and CRA did not find any relevant receipt of your business travel they can cancel your claim.
- Vehicle Expenses
If you are using a Vehicle for any business purpose then you will also need to keep a relevant record of your vehicle expenses it can be as fuels, parts changing, etc.
- Gift Receipts
Gift Receipts like passes to a show, it is also necessary whether the provider goes with the occasion beneficiary. the costs of the gift will be delegated excitement instead of a gift. We also need to write details behind the gift receipt.
- Home office receipts
There are many things in-home office receipts like vehicle cost and the things utilized for businesses it can be computed with depending on the businesses use.
6.Use Different Account for Business Expenses
A business bank accounts always necessary to keep your business-related transaction separate from your personal transaction, and it comes with special conditions for businesses.
Professional checks make it easier get your records management easier. To manage expenses we have to write a reminder line in front of expenses that make it easier to manage.
7.Use Different Credit card For Business
Credit cards make it easier and convenient for business expenses. Credit cards give some facilities like additional expenses, by the expenses through credit card one gets rewards and benefits every time you swipe. Using a separate credit card for business expenses is always good for personal expenses as well as business expenses.
8.Plan your Desired expenses for a particular year
According to IRS, we need to maintain every record for at least three years. Generally, we need to keep records from the date of filing the tax return or from the due date of the tax return. And we have to keep separate our business expenses for a financial year. It will make it easy to submit a tax return.
9.Choose Best Accounting Software For Your Business
This is the time of the digital world where technologies grow day by day, there are many legion accounting packages for little businesses in the market. many of them are freed from price and few are paid. Some of the packages are supported by cloud computing that’s why we can easily maintain and manage our business expenses on our mobile and laptops. FreshBooks and Zoho are the accounting app where any small business can be easily managed. Freshbooks and Zoho take $10/month to manage the business.
Lots of things adopted by many small businesses. Because the owner needs good habits and perseverance to maintain. If anyone applies these rules and makes a habit of maintaining records then the business can grow throughout the years.