4 Top tips to make managing expenses a walk in the park
Tackled in the wrong way, managing business expenses can be like trekking through a jungle, with random receipts, forgotten spending and missed tax deadlines waiting to trip you at every step. Done correctly, it can be a walk in the park. Solo Expenses offers four top tips to help you stay on top, and relax in the afterglow of a job well done.
1. Be disciplined: Little and often is best when it comes to managing business expenses. Take the analogy of cutting a lawn. Do it every weekend through the summer and it won’t feel like a chore. Do it once, in September, and it’ll take you all day, you’ll be exhausted, sweaty and covered in grass, there will be heaps of clippings to dispose of, and the lawn will look as much of a mess as you do. Set aside time for paperwork, and make it a routine task. A week’s worth of expenses doesn’t take long to record, unless you leave it until next week, or the week after that. By then it will have started to get out of hand, because receipts for out-of-pocket expenses will have got lost or damaged, your memory will have discarded things it believes are irrelevant, but are actually nothing of the sort. Our experience is that ‘record as you go’ is the best option, with our free-to-download money management app Solo Expenses allowing you to record every spend on the spot. THEN you can forget about it with a clear conscience, because all the vital information is captured for accessing later by you or your book-keeper.
2. Check statements: For all things banks are perceived to have done in recent years, it’s impossible to take away from them that their records of your finances are likely to be more accurate than yours. You’ll only know that by comparing your records with theirs, in the form of your bank statements. Because of the growing modern tendency for companies to pay their bills without issuing a remittance you may find that you’ve been paid by a client without being aware of it. Furthermore, the use of plastic in the form of debit and credit cards mean they offer no means of recording spend at the time. Convenience and speed at the point of purchase comes at a potential cost of inconvenience and wasted time later, if you let them.
3. Don’t mix: Oil and water don’t mix, and the same is true of personal and company money. You should never spend company money on personal items. Even if the company is a one-man band, and the man (or woman) owning it, the money in its bank account isn’t yours to spend on yourself until you’ve gone through the right processes to make it so – by paying a salary or drawing down a dividend. Your company is a separate legal entity, and as such the money you’ve earned through it is company property. However, the rules are different for spending in the opposite direction. There’s nothing to stop you spending funds from your own pocket on legitimate business purchases or expenses – because the mechanism exists for you to claim it back, so long as you can prove you spent it in the first place.
4. Get help: Do you see the thread running through these points? It’s about being in control of spending all the time, and doing that effectively is best done with a little help. Two things are vital. The first is in the way you record your spending properly. It starts with your diligence in making sure nothing is left out, because all of it is significant. Overlooking a segment of your spend will skew the appearance of your financial position, and as a result may also lead you to make the wrong strategic decisions, leaving you overstretched at the bank. The way to do this is to use a money management app for expenses management, such as free-to-download Solo Expenses for individuals or small groups, or its bigger brother Expense on Demand And secondly, get a good accountant. You need someone who’ll be there at the end of the phone or in person throughout the year, and will therefore understand your business, but with an outsider’s eye. That allows then to be objective and to help you understand what you can and can’t claim as a legitimate business expense, which will stop you paying too much tax.
Remember, money makes the world go around. Being aware of what it’s doing in your business lies behind peace of mind and business success; ignorance can be very expensive in the long run.
Picture: Michele Cornelius | Dreamstime