4 Money management tips for staying on top of business expenses
Is this how you manage your business expenses, allowing them to slip through your grasp like dry sand on a summer beach? If so, it’s high time you became switched on to expense management. Here are four top tips to make you a better expense manager
Failure to record every business expense is probably going to create another expense for you – a higher tax bill that will have to be paid from a smaller pot of available money, all because you didn’t record your spending.
That’s the unintended consequence of poor money management as ‘practiced’ by thousands of small businesses.
They don’t worry about the expense of half a tank of fuel in the company van, bought from the owner’s own pocket because he’d left the company debit card at home, or the half-dozen consumable items bought in the same way for the same reason, or the share of utility bills for the home office. It happens only once a month or so, and it’s not a lot of money, so where’s the harm? In your pocket, that’s where.
The result? At the year end it looks as though the company has made greater profits than was actually the case, boosted by personal money left in the business in the form of unclaimed expenses. But the taxman deals in numbers, no allowance will be made for your failure to keep track of your spending. So here’s what to do; and you should start to do it now.
- Understand the spend: It’s impossible to manage what you don’t understand, so the first step is to review your business expenses. By doing so you’ll form an accurate picture of what you’re spending, and may well be able to prune back in some areas. Eliminate unnecessary spending might be in order, or perhaps switching suppliers would be a viable option. About every expense, ask yourself this: What value is this adding to my business? Use your answer to point the way to a course of action.
- Don’t mix it up: As a small business owner, every penny you own has been generated by your business. It’s been accounted for, and you’ve paid the tax due on it. So why would you put it back in there, where it will ultimately be added to the revenue and be taxed all over again? Don’t say that never happens, because it does; every time you pull out your personal debit card to buy fuel for the company van, for example, or drive to see a client without claiming back the mileage. (And remember that claiming a mileage allowance is about way more than the fuel costs; every mile you drive brings your car a little closer to its next expensive service).
- Don’t get too relaxed. Just because you’ve always done something in a particular way doesn’t mean it’s still the right way to go. It’s always worth thinking outside the box about where and how you buy supplies to see if it’s possible to unlock savings and discounts. Think about your premises. Are they too big, and therefore too expensive? Is a lease coming up for renewal? If so, could you negotiate better terms, or even think about moving? How much stock do you hold? Are the quantities realistic, or could you manage with less? Never forget that every business is about generating revenue, and having as much as possible to take out of it when the time comes. That means you ought to spend time playing out alternate scenarios in your head, and evolving your business to around sound money management.
- Go Solo: The only person who can control the expenses in your business is you. Being a good expense manager is about mind-set, and once you’ve decided you’re going to do it, you need one simple piece of equipment. Small enough to be near-invisible, but powerful enough from within your smartphone to monitor your spending, the Solo Expenses Personal Use money management app was the first of its kind to be developed exclusively with the sole trader in mind. That means it records expenses through your phone keypad, photographs receipts, lists what you’ve spent in the right category, and exports information to your accountant whenever you want.
And all that lifts a great weight off your mind, because you can not only record spending at the point of purchase, but do it on your phone, which will be with you wherever you go. Using Solo Expenses means there’s no danger of you not claiming back from the business what you’ve put into it – so long as you’re disciplined enough to use it, because although it’s a good app, it can’t do your thinking for you.
At its most basic level, Solo Expenses is free to download for personal use. For a business owner there’s a tiny outlay of £2.49, which is well worth spending because it unlocks extra features to make the money management app even more versatile. What’s more, it will probably work out to be free anyway, since your added expense management discipline means you’ll probably save more than £2.49 a month anyway. What are you waiting for? There’s no time like the present; road test it now with a free download here, where the features and benefits are also explained.