Benefits of properly tracking your business finances

Business owners know that tracking and managing business finances is an essential task, but oftentimes, this task isn’t done efficiently. While it’s true that managing business finances can be challenging, there are many ways to make this task become a priority and not a dreadful chore. Financial tracking and management for your business don’t have to be restrictive, nor should they be complicated. Financial tracking is a way of safeguarding your finances and leading your business down a well-paved path to success. 

Read on as we share some benefits of properly tracking your business finances.

You Are Well Prepared for the Tax Season

The tax season can be a dreaded period if you lack the preparation for it. It’s not just business owners who face this dilemma, many taxpayers often fall into this situation. Technology has come up with innovations that help make your preparation a lot easier. It can take considerable effort to keep documents, invoices, and receipts filed and stored in one place over time. There’s also the possibility of losing or misplacing these records. An automated way of keeping track of your business expenses through Keeper Tax or any reliable expense tracking software not only keeps your records of expenses in order, but it also helps identify tax-deductible expenses. 

This means less stress and less worry about whether you are losing money due to purchases for write-offs you might have missed. You also get some money back from these tax-deductible expenses, which often include the following:

- Rent expenses

- Travel expenses (e.g., fuel costs to attend a client meeting)

- Cellphone and data costs

- Business supplies (e.g., stationery)

- Business lunches and meetings

Your expense tracking software may also find other expenses that you don’t consider tax-deductible but are, based on the tax guidelines. Also, if your business operates a home office, your home-office expenses can qualify for a write-off. As an example, if 20% of your home is allocated as a home office, you can claim 20% back from your home-office maintenance, utilities, and other expenses.

You Manage Your Business Cash Flow Better

Some business owners make the mistake of disregarding the value of managing the cash flow of their business. While making a profit is essentially the goal of your business, keeping track of how your money goes in and out of your business is an essential task that shouldn’t be overlooked. Both profit and cash flow are important in keeping your business afloat, so you should balance managing both to keep your business running smoothly.

In essence, cash flow involves the flow of money in and out of your business for sustaining operations, investments, and finances. It allows you to pay your expenses on time, which include operational costs, rent, employees, suppliers, and insurance. 

Profit or net income is essentially the revenue remaining after the expenses are subtracted. For a business to survive, it needs to be profitable. It means your business has to make money exceeding what it spends to stay in business. 

Tracking business expenses daily helps you control costs and gives you a clear picture of where your spent money goes and how much you are spending. Daily spending data can help you set markers and projections for your monthly budget. It also helps you become more financially aware and make wise spending decisions to help generate savings for your business.

You Are Moving Your Business in a Healthy Financial Direction

Tracking your business finances helps you revisit what you have been spending your business’s money on and think of new ways to help it grow and thrive for years to come. As you become more financially aware, you begin to look at money matters objectively, and you think about the future of your business as well. As you revisit your spending, you might recognize spending items that are not necessary, those that can be reduced without affecting the business (e.g., coffee makers, microwaves, etc.), and those that do not contribute to generating more revenue and profit. From there, you can decide on setting aside money for more useful endeavors like looking for growth opportunities for your business. 

You also need to be careful not to let your business get caught up in rapid or unexpected growth because it can cause a crisis in your cash flow or profit. Letting your business grow takes patience and careful observation of your spending trends, operation status, and the steady balance of your cash flow and profit.

You Can Easily Determine the Profitability of Your Business

It’s not enough to get a rough idea that your business is doing good and is making a profit. You have to at least know how much of a profit your business is making. We did mention earlier that profit is essentially what remains of your revenue minus expenses. It may look like a simple calculation at first glance, but the accuracy of your profitability calculation can be tricky if the records of your income and expenses are not accurate to begin with. This highlights, even more, the importance of proper tracking of your business finances to arrive at correct figures and eliminating incorrect assumptions about your profit. 

Daily tracking helps you closely monitor daily expenses and how they accumulate into monthly and yearly expenses, and how they correspond with your revenue. When you get accurate profitability data, your decisions regarding your business are clearer and data-driven, making them less prone to costly mistakes.

You Effectively Project Reimbursements

If you are running a team of employees, especially if they spend most of their time in the field, you need to be prepared to provide expense reimbursements. There will be times when team members use money from their pockets to support business-related activities, and they will send you receipts for meals, travel expenses, and other out-of-pocket expenses. Staying on top of things to track and handle these reimbursements will boost the morale of your employees. They will be happy if you promptly and accurately reimburse them without them going through the trouble of following up on you about the expense reports they filed.

What we shared here are just a few of the compelling benefits of tracking your business finances. When you get a clear picture of the spending patterns of your business, you also get a clear projection of financial objectives and how to accomplish them. Technology is offering ways to make your financial tracking easier, so you don’t have to stress too much about tracking your finances. By now, you should be able to look at financial tracking in a different light and realize its usefulness.