Sunday, April 25, 2021

Why Worry About Expenses?

 What Are Expenses?

    Expenses are the money you spend to run your business. The big question is why worry about them? Here are a few basic reasons:

  • You will know how much money your business is making.
  • You will lower the amount you have to pay in taxes.
  • You will need them organized if you are audited by the IRS.
  • You will stay within your budget.
  • You can grow your business by knowing how much cash flow you have.

How Often You Should Track Expenses?

    The exact timing will vary, but the general times are daily, weekly, monthly, quarterly, and yearly. Here are a few common items and a recommended schedule:

  • Small expenses should be tracked either daily or weekly.
  • Most set expenses will be on a monthly basis.
  • Estimated Quarterly Tax Payments, and often Sales Tax Payments usually are on a quarterly schedule.
  • Yearly expenses are important to keep track of because it is easy to forget things that only come once a year.

Ways to Keep Track of Expenses

    There are many ways to keep track of expenses, and this is a personal choice that works for you! There is no right or wrong way, as long as it gets done. Below is a list of some common ways to track your expenses, and keep them organized:

  • Use any type of spreadsheet. ( There are  a lot of free ones found on the web.)
  • Use accounting software. (There are many types of both free and paid software, so choose the one that most fits for you.)
  • Hire a Bookkeeper or Accountant ( If you have a small business, then a Bookkeeper can be a great choice for you. If you have a more complex business, then an Accountant may be a better choice.)
  • You can keep it as simple as a notebook, however, this is not the recommended way. This is not the preferred method for and IRS audit and may end up costing you money.
    This information is not a huge news flash, but I wanted to take it down to basics today. The method is not as important as the doing. Expenses are a big deal because we all need to know how much our business costs us. 

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