How to Better Keep Track of Business Finances

Keeping track of finances is one of the key pillars of astute business management and should be at the heart of every entrepreneur's day-to-day regimen. Knowing how much is coming in and out of your business at any given time gives you a better understanding of your financial situation. It allows you to rectify any minor financial concerns before they metastasize throughout your operations, and it allows you to leverage your assets so that you can grow your business at a fast and efficient rate. Here are four ways to better keep track of your business revenue and expenses.

Open a Bank Account For Business Use

If you run a business as the sole proprietor, it's important to separate your personal and business finances if you haven't done so yet. Put all of your business-related cash into a business account, and then connect it to a credit line or checking account that's solely for the purpose of business transactions. Anytime you buy supplies, equipment, or services, pay with that business credit or checking account. You can move cash around from a personal account into your business account and vice versa. The important thing is to draw a clear line to avoid confusing transactions. For instance, a relative might send money to your checking account for a special occasion this month. You don't want to mistakenly see this as business revenue or available capital as it creates future analytical inaccuracies.

Digitize Your Receipts

It's difficult to keep up with an increasing number of physical receipts - you have to allocate physical spaces for it and they are chaotic to look at, all crumpled up and scattered across the room. Make it easier to manage your receipts by digitizing all your transactions, from bank withdrawals to account payables. Request an email copy of the receipt from your vendors and business partners. Digital files tend to be a lot more secure and are easier to organize and synthesize into usable information. Having a complete record of your past transactions also makes it easier for when your business is audited by the IRS. For instance, an IRS tax lien removal can be requested quicker if you have all business transactions accounted for. A tax lien from the IRS essentially puts your business assets at risk of getting seized.

Use Expense Tracking Software

Tools, such as Google Calendar, can help you keep track of all one-off and recurring expenses. Google Calendar's "event" form is especially helpful in noting what type of expense it is, whether it's utilities or independent contractor services, and the recipient of the transaction. It can be difficult to keep track of expenses, especially if you are traveling for business. Being on the go leaves no time to jot down specific details of each transaction. You can also set up app or email notifications for upcoming expenses to avoid any late payment fees. Aside from expense tracking, many comprehensive accounting software programs also lets you create multiple expense categories and then auto-fill them on your tax forms, a nifty feature for effortless tax filing.

Get Professional Help

A good bookkeeper can be worth the $20 to $50 per hour that you pay for their services. You don't even need an in-house bookkeeper on the payroll. You can hire an independent contractor who works a few hours a week every month to scrutinize your receipts and invoices and make sure everything is financially up to par. Professional bookkeeping services also pay for themselves since they often find business deductions that you fail to notice. Last but not least, a bookkeeper gives you additional peace of mind that the IRS won't just flag your business for wrongful and inaccurate claims on your taxes. When looking for a bookkeeper, always prioritize those who have a notable amount of experience over those that charge low prices for their services.

Final Thoughts

Tracking business finances is less complicated than how most first-time business owners and novice entrepreneurs perceive the task to be. By being organized and proactive with your finances, your business can continue to flourish unencumbered by outdated books, stressful tax filing seasons, unclaimed tax deductions, and an unpredictable cash flow that puts your business at risk of being undercapitalized.