Regardless of the scale of your business, no entrepreneur starts with a vision to understand how to track their income and expenses. The focus is often on the products and services more than keeping an eye on tracking your expenses from day-to-day utilities. Managing expenses and tracking spending habits requires a specific forte which may need you to hire a specific person for that very task. Even if you do have a personal finance assistant, small businesses often neglect to keep an eye on spending habits until the last minute because it’s tedious and repetitive work. This is where an expensive tracker comes in handy.
Simply put, an expense tracker is a software or an app designed to manage everyday living expenses. It can manage both personal as well as business finances. This app can sometimes be linked directly to your bank account. It can also act as an intermediary to track your cash flow and see how much money is going and coming back to you. This is particularly useful with individuals on a fixed income salary to track expenses. Apps also help empower you to be your own personal financial planners. It is also very useful for small to medium businesses in tracking their budget, income, credit, debit and automatically save and record transactions.
Why is Expense Tracker Important?
Need for tracking your expenses
While we cannot control our salaries, we can track our expenses and monitor our cash flow. More often than you think credit happens because of poor budgeting and bad management of the financial budget. You can have better control over how much you spend if you have an automatic system. The system should be apt in keeping track of your credit card and debit card and process its transactions systematically. Automated expense tracker software makes the process of tracking each expense much easier.
Every individual and business has designated end goals, whether they are monthly or annual or for any period of time. It is natural to expect our bank accounts to be able to match the life we want to perceive. Expense tracker apps help you identify where each category of expenses. They help you be aware of how much you need to save every month to bridge this gap.
Expense tracking is more than just cataloging
Maintaining a copy of your receipts isn’t the same as financial management. Sure, you can save your expense and cash records manually but you won’t be aware of where you can save. Tracking your expenses help you identify your biggest debt sources. This helps you make informed decisions on how much you spend. A good expense tracker app would have additional features as well such as monthly reports, saving receipts, tips to budget better, record income from other sources and so much more. The app should be perfected to suit your business. Opt for an option that’s customized to work seamlessly so that your money tracking and expenses aren’t mental calculations on the fly.
Advantages of expense tracking
Still on the fence about whether your business needs an app for expense tracking? A dedicated app for expense tracking offers much more features than you can imagine for businesses of all sizes and even personal use.
Savings for goals
If you track your expenses regularly, you’d not only know where your money is going but also help be more disciplined in savings. An app that understands your bank account, income, and expenses helps you decide how much you need to save every month. For example, you can set a desired money-related goal and then input how much you spend money. By tracking each expense, a small business can easily get a simplified prediction of the time needed to buy a new asset. Features such as the predictive date for what month your goal security would be in your bank account are extremely useful.
The app you select should be able to automatically advise and highlight your largest expenses. This runs like how credit cards work by tracking your spending across the month. All you need to do is highlight each expense, enter it manually or use OCR technology and let the artificial intelligence do the rest. Let’s say you wish to upgrade the desktops in your work and that needs about 6000$ in spending money. The app predicts if you track your spending, you should hit that goal in just 7 weeks by just saving 857$ a week. This way your financial budget doesn’t drastically change and you can focus on new ways to make money rather than fall into the trap of credit purchases.
Developing good financial discipline
An expense tracking app also introduces financial discipline to keep an eye on your expenses. Often with credit cards since expense tracking comes only monthly, we get the illusion of unlimited finances. There is little care about the debt until it costs our accounts to dip into debt. Tracking expenses via an app introduces a layer of budgeting by getting not just monthly summaries by instantly accessible financial reports. You create your own rules and the app gives you advice along the way.
The process sounds simple but it accounts for preparing better for the future. As a business owner, your goal is to ultimately reduce your expenses or at least track your expenses and increase profits. Having good discipline via knowing your worth and expenses helps in the process of self-evaluation.
Investments and savings
Do you dip into your emergency funds more frequently than you had anticipated? Does your budget keep overshooting and your team cannot figure out why? This is where expense manager apps come in handy by sorting your investments and savings in a much easier way.
Once you input your costs, you can see in a visually understandable simpler way how much things cost and what purchases you incur. This helps make informed, calculated decisions on your next purchase. When you divide expenses via categories it becomes easier to manage what costs can be cut down. For example, you may see one category, let’s say utilities costing you more than it should. You would be able to easily spot this compared to a manually typed bland excel file.
Time is indeed money when it comes to finances. Costs don’t stop regardless of your business speed. It becomes easier to manage the working of your business when you can dedicate some tasks to automation. Some apps designed to monitor the number of finances you spend are smart enough to use minimum clicks giving you time to focus on other things.
Imagine not dedicating several hours/days every month to tell your finance manager to account for every income and expenditure. The time you save from going through your debit card and credit card’s statements can be better utilized in much more important ways. Teaching the staff to learn to use the expense manager apps leaves them free to dedicate their resources elsewhere.
Better competitive advantage
In today’s day and age of competitive business practices, you may find yourself confused with how to differentiate your business from your peers. This is why adding even behind-the-scene features such as money tracking sends a positive image to your customers. Clients may look at your business as modern as they represent if you use apps to track your expenses.
There are dozens of apps to choose from, some even offering their income spending management features for free. But budgeting apps need to be catered to your modern style of working. It is statistically known you’d end up using your phone much more. That’s why it’s a smart idea that your apps are also on your phone. Imagine getting a notification about how much your team spent or the cost of the new paper is more than what you paid last month. This helps create a new way for you to manage the security and track money spent.
4 Steps to track your expenses
The more you understand about your own expenses the better you can manage them. Ultimately, even the smartest software or accountant can only help you so much. Making informed decisions rest solely on you. This is where smart expense tracker apps help. By seeing your data objectively you can make smarter decisions in planning and execution.
Although it varies from company to company, a basic budget plan should include certain headings. The objective of every budget should be to clearly see where money is coming in and going out so that you can plan better.
1) Sourcing input money
Exactly how is your money coming from? You’d notice there are primary as well as secondary ways you experience income Knowing and managing all sources of income helps in creating a well-managed budget. You can get the primary figures from your sales, profits, net income, secondary sales, subletting, leasing, services, etc. These figures should be pretty much consistently running expenses, with little variation unless of course you expand.
This should be the first in your accountability charts as you map your accounts. Remember to save and lodge all your receipts!
2) Permanent costings
Certain recurring costs would happen daily/ monthly or weekly as the cost of running your business. These can include electricity, sourcing primary product or services, salaries, running expenses. These are relatively easy to calculate as they are predictable on what you’ve based your previous years/ months usage.
Add these to your operating plan. You will get an accurate prediction of what to expect and this can help you budget more wisely.
3) Variable expenditures
Invariably, there would be some expenses which you can have the affordability to play with. Some months they would be much higher than before. The prices would vary upon availability, demand, and supply. These can include returns, refunds, damages, losses, loss in transit, improper goods or services etc.
The market dictates these prices massively. Your own budget and goals for expansion or decline also play a role. If your profit is high, or you wish it would be higher, naturally you’d have to invest more. The old saying you have to spend money to get money is very relevant here.
4) Asset building emergency funds
Always keep a sufficient amount of money for emergency use. These funds help in unexpected purchases. Having this margin gives you not just the economic liberty to fiddle, but also gives you security. Sometimes damages and expenses are unpredictable. To prevent them from going catastrophic, savings come in handy. With budget manager apps you can see what’s leftover to aim for a decent emergency fund.
It’s important to utilize this fund only when it’s really needed. If you end up using this fund for just about any expense then it would cease its function.
To conclude, It’s important to have a smart expense tracking solution that helps you manage your money better. The state-of-the-art expense tracking features include category-wise budget tracking thus helping you manage your spending. You not only track your spending but can also allot an emergency fund. From a secure place to save your receipts, you create a new expense category and save your accounts with security.
Rustam is a tech content writer with more than 8 years of experience. Rustam is a post graduate in journalism & communications and has a byline in several major publications. He’s worked in several reputed newsrooms, digital magazines, newspapers and businesses as content management and editing. When he isn’t writing, he loves to trouble cats and lift weights.