Tracking expenses is a must to have a clear view of costs, efficiently manage cash flow and prepare for future audits. In addition, valuable tax deductions can be lost if the right tracking system is not used to accurately track expenses over the year.
The following tips can help business owners stay on top of mileage and other business expenses.
- Separate business from personal spending – Opening a business checking account and using it as the exclusive funding source for business purchases is the first step to accurate expense tracking. The same logic applies to credit cards- there should be a credit card for business-related purchases only.
- Use checking account or credit card transaction info – In the past, business owners were often forced to keep detailed logs in order to track spending. Now, in most cases, online banking platforms provide clients with all the relevant info regarding transactions, including the amount, date, and the payee. Many banks and credit card companies also provide downloadable activity reports which can take away much of the manual labor for recording.
- Log info regularly – Whatever tracking method is used, it is important to log expense information regularly. It’s the choice of the business owner whether lo record daily, weekly, bi-weekly, or monthly but the longer the gap between spending and logging, the more likely it is to forget, lose, or omit vital information.
- Use an expense tracking app – There are apps available that can help streamline mileage and expense tracking. Some can even integrate with accounting software. Choose an app based on the type of expenses to track, usage limit and cost. For example, Expensify and TripLog can track both mileage and business expenses.
- Establish a clear expense tracking and submission policy – It is important to have a clearly defined expense reimbursement submission policy. It should include all the needed information, submission deadlines and what supporting documents to submit
- Set expense limits – There should be specific limits or spending criteria that can be reimbursed. For instance, how much is the meal allowance, what type of airfare (e.g., first class, economy class), or maximum hotel stay costs.
- Know tax-deductible expenses – Regular expense tracking is important in filing the right tax returns. So, business owners should be aware of what types of expenses are deductible and which are not. To be sure, they should consult the IRS small business deductions page as well as an accountant.
Tracking expenses can be a challenge to business owners but it can make it easier to run the business and manage its finances.