Managing Day-To-Day Expenses
We all dream of winning the lottery; we crave the financial freedom to buy anything we want and not worry about paying the bills. But whenever you try to play the lottery, the chances are that you’ll only lose more money.
So, how can you achieve the financial stability you crave for yourself or your business?
Well, there are many methods to achieve financial stability, but the one that stands out the most is managing your day-to-day expenses. Unfortunately, managing your daily expenses isn’t always easy. It demands creativity and invention of methods that may have never walked on.
This post discusses why managing your daily outgoings is important and contains experts’ tips and tricks for managing your daily expenses.
Feel free to jump ahead!
What are expenses?
Expenses are the money your business spend and the costs you incur when pursuing revenue. It’s the necessary costs you incur when running your business. It includes rent, payroll, inventory, and insurance.
Why should I manage my expenses?
Tracking and managing your expenses is beneficial despite how mundane the task can be. It saves you time and stress in tax preparation, helps you become more money aware, keeps your employee happy, etc.
Here are the reasons to manage your business expenses:
a. It improves your money management skills and makes you money aware
Poor cash flow management is cited as one of the main reasons small businesses fail. That’s why it’s vital to manage your cash. And one way to manage your cash is through daily expense management. You don’t want to be in a situation where expenses outstrip your business income.
Keeping track of your expenses also allows you to control costs and see where your money is being spent. This can allow you to fix bad spending habits and make informed spending decisions.
b. It prepares you for the tax season
The tax season is one of the most hated times of the year – and for a reason! Scrambling to find your invoices and receipts on drawers or laptops during this time is common in most businesses.
The result is failure to keep accurate records, which makes you miss out on tax deductions. Many expenses (like travel expenses, business lunches, cell phones, office supplies, etc.) are tax-deductible, meaning you can get your money back.
c. Keeps your workers jovial
Managing your outgoings means looking into the receipts for meals, travel expenses, and other out-of-pocket expenses. You can reimburse the employees with clear records of such expenses, keeping them happy.
d. You can determine your business’s profitability with ease
The chances are that you already know how to determine your profits: revenues-expenses. And determining your business’s profitability helps you attract investors, helps you get financing, and fund your daily business operations.
Tips for managing your day-to-day business expenses
Running a business isn’t always about boosting revenue but also reducing expenditure. So, in addition to increasing your business’s sales, it’s crucial to cut expenses where possible to obtain or maintain profitability.
Here are the seven best tips for managing your daily business expenses:
Tip #1: Make a budget
Making a budget and sticking to it is one of the most important aspects of a business. A budget helps you understand how much you’ve spent, how much you have, and how much you need in the future. This helps you make important business decisions, like cutting unnecessary expenses or reducing staff.
You can use online software, spreadsheets, and other apps to make a budget.
Tip #2: Record your expenses daily
It may not always be workable, but the best time to record an expense is immediately after you spend the cash. Take a few minutes of your time and record the day’s expenses. For instance, if you are using a train to meet a client, take a photo of the train ticket and upload it to your accounting system.
Tip #3: Store your receipts online
In today’s digital world, where everything runs digitally, you should also have an online system to record your outgoings. Uploading and recording your receipts online keeps you organised, saving you money, time and stress you’d have encountered with paperwork.
Imagine knowing how much you’ve spent, when, and where it was spent, all by a click of a button. You can even access some of these systems using your mobile phone. It even gets better during tax season, as you can easily access the receipts because you know where everything is.
Tip #4: Review your expenses weekly
Don’t wait until it’s the end month or when the tax period approaches to review your outgoings. Set aside time (one hour per week should be enough) to go through your expenses. This will help you determine how much is going in and out and possibly project your monthly profitability.
Tip #5: Separate your expenses from other costs
Remember to separate the costs paid using your business’s bank account from the out-of-pocket expenses when recording expenses. So, if you paid £30 from your pocket for a train ticket to meet a client, make sure you record it different from an expense paid through your business’s bank account.
Separating the expenses may sound like extra work that’s not mandatory, but it’s important for tax purposes. If HRMC inspects your records, they’ll expect to see accounts that match what’s in the bank. It also helps you reimburse yourself or your employees for out-of-pocket expenses.
Tip #6: Follow the 50:30:20
The 50:30:20 rule is a budgeting method that helps individuals manage their money more effectively and sustainably. According to the rule, you should divide your business’s monthly after-tax income into three categories: needs (50%), wants (30%), and savings (20%).
The needs would include your business’s outgoings on utilities, rent, inventory, payroll, insurance, etc. Wants would include specialised rest places for your clients and employees and should take up only 30% of your income. Then, you should save 20%.
The bottom line
Money worries – whether business-related or personal – are a significant cause of stress and sleep nights. Managing your cash flow well is the key to leading a liberated financial life, free from debts.
This post discusses the six best tips for managing your day-to-day expenses. Good luck as you use it to promote your business’s money management.