10 Tips for Tracking Expenses While on the Road
Busy professionals work throughout the year, accumulating expenses and tracking income. For those who track things every day throughout the year, they simply must take that information to their accountants at tax time. However, if you find yourself scrambling at the beginning of each year to put together your books from the previous year, you aren’t alone. Many professionals find it’s all too easy to get behind on their bookkeeping.
Tracking expenses is one of the trickiest parts of accounting for small business owners. Here are 10 tips that can help you improve your expense-tracking efforts to make things easier for your tax preparer.
If your regular practice is to shove receipts into the pockets of your laptop bag throughout the day, you’re probably losing at least a few expenses. Over time, this loss adds up to hundreds or thousands of dollars. There are apps now available that will allow you to scan all of your receipts using your smartphone or tablet’s camera. Once you’ve saved the receipt, you can then throw the paper version away.
When searching for a receipt scanning app, be sure to choose a service that will allow you to easily search for the receipts you need, when you need them. If you amass hundreds of receipts each month, you may find that software without search capabilities is useless, since you’ll never be able to locate the receipt you need if you’re asked about it at a later date.
Your tax preparer can give you a list of categories of IRS-accepted expenses. Categories like transportation, meals, lodging, and business use of your home are standard for professionals claiming business deductions. If you can slip each expense into one of those categories, you’ll make things easier for yourself and your accountant at tax time.
Another benefit to categorizing expenses is that you’ll be able to clearly see where your money goes each month. This could help you identify areas where you’re wasting money, allowing you to adjust your spending habits to make your business more profitable each year.
Track as You Go
Starting January 1st of each year, you should begin tracking your expenses in the software you’ll use to provide the information to your tax preparer at the end of the year. If you track your expenses as you go, you’ll find it’s much easier to avoid missing something. For best results, use an app that allows you to track your spending on your smartphone while on the go. This will keep you from losing expenses before you can enter them at the office.
If your expense-tracking app doesn’t automatically export items to your bookkeeping software, set a day each month to manually handle this task. It could be the last day of the month, when you’re reviewing your books, or it could be the beginning of the month, when you’re planning your spending for the days that follow. Whatever date you choose, make sure it’s a day each month when you won’t have other tasks drawing your attention away.
Use a Mileage Log
Mileage is an important part of expense tracking, especially if you spend a great deal of time in your car every week. Whether you’re traveling around town or around the country, you should be tracking every mile you spend in a way that can be presented to auditors if necessary. If you merely “guesstimate” your mileage each month, you’ll probably have a difficult time if you’re ever audited.
For best results, keep a mileage log to track your mileage as you go. You can use an old-fashioned paper-based log, but there are also apps available that will help you with this. If you’re on a business trip, track your mileage using your odometer from the time you leave your home or office until you return. You’ll be surprised how much extra miles you accumulate simply driving around town.
Instead of booking each trip separately, consider consolidating your travel by going through the same website for everything. Expedia has a business section that helps you book trips and track expenses all in one place. Once you’ve hired additional employees, this centralized type of service will be especially beneficial.
If you’d prefer to turn everything over to someone else, you could use a travel agency to book all of your travel. These services won’t charge fees and will sometimes be able to access discounts and perks you wouldn’t receive on your own. However, be aware that travel agencies make their money by recommending certain airlines and hotels within their narrow networks. You may find you get better deals on your own because you have a bigger selection.
Use a Separate Credit Card
When a business owner starts out, it’s common to use a personal credit or debit card for business expenses. After all, business credit has to be established before an entrepreneur can access a business card. However, when you tie your personal and business purchases together on the same card, it can be difficult to isolate your business expenses as needed.
Instead of wasting valuable time searching through hundreds of purchases to find the business-related ones, take out a separate card that you’ll use for business purchases only. If you can put this card under your business name, it’s a great way to establish credit. However, if you don’t yet qualify, simply set up a separate personal account for your business and confine work-related charges to that card.
Keep a Daily Journal
In addition to a mileage log, a daily journal can be a great way to track your expenses. If you use a daily planner, electronic or paper-based, you can track your expenses there. If not, you can simply note them in a note-keeping app or a small notebook. When you log each of your expenses on a daily basis, while they’re still fresh, you’ll avoid forgetting something essential.
While searching for the right app to track these expenses, look for one that integrates with your existing accounting software. There are many apps out there that promise to “track every dime,” so it should be easy to find one that keeps you from doing duplicate work.
Back Up Files
The most important thing you can do as a business owner is to regularly back up your files. This extends to all of your files, but it is especially essential for your expense tracking. If you track expenditures every week and lose all of that information at the end of the year, it will be even worse than if you’d waited until the end of the year to collect everything. You’ll assume that you have everything covered in your expense-tracking software and lose valuable documentation.
Before choosing an expense-tracking app, ask questions about the dependability of the provider’s backups. If a server goes down, you should have the confidence of knowing that your information will be safely restored as quickly as possible.
Save Receipts for Six Years
If you’re scanning your receipts in, make sure the information is safely stored for six years. You’ll need this information if you’re audited. If you can backup the scanned images of your receipts to your own computer or server, do so. This will give you the security you need to toss those receipts rather than keeping up with them.
If you’ve opted not to scan your receipts in, you’ll need a file cabinet in which to safely store all paper receipts for six years. Unfortunately, you may find the ink starts to fade after a couple of years, so you may find this method isn’t as reliable as scanning and saving them.
To make things easier, your expense-tracking solution should be an all-in-one solution. There are solutions available that scan receipts and read the information, delivering it to your expense sheets. They’ll also track your time for billing purposes and track the distance you travel on a daily basis.
When all of your information is in the same place, it’s much easier to manage everything. Best of all, these apps are smartphone and tablet capable, which means you’ll be able to review your expenses from anywhere.
To protect your business’s revenue, it’s important to ensure you’re claiming every expense you encounter. By tracking your expenses each day, you’ll make it easier at tax time to make sure you account for every dollar you spent throughout the year.