The importance of tracking your expenses

Here’s why every business needs to use online expenses software to understand the true picture of the way money moves through the ‘expenses conduit’ – and what it must do with the information that become available.

Without money, a business will fail as surely as an engine devoid of oil will fail. Finance is the lubrication that allows business to work; to settle invoices, pay employees, and invest in the future.

In that context, the importance of tracking expenses cannot be overstated, and the best way to do it is by using online expenses software.

The equation
Reduced to its most basic level the calculation of a company’s financial performance is this: Revenue – costs = profit. If the answer is a negative number, there could be problems on the horizon.

But it’s impossible to put numbers into that equation if they’re not recorded diligently. Big sales and lots of revenue are fine, but you must know that cost at which they’ve been achieved, otherwise they’re just a strong of numbers.

In terms of expenses, it’s not enough to check once, at the end of the financial year, to see how much money went on ‘expenses’ through that year. A business must delve more deeply into how it’s spending its money and on what it’s being spent. It needs to know if the activities involved are adding value, or if they’re a drain on resources.

The example
Take the prestigious trade show, when the company rented an expensive stand on the corner just inside the main entrance, where everyone who attended passed it at least twice, once on the way in, and once on the way out. Factoring in everything involved, the cost will have included rental, staff salaries, loss of revenue because staff were taken off their day jobs to attend, creation of collateral, staff hotel bills and food, the travel involved in getting there and setting up the stand beforehand, and then taking it all down again afterwards. And then, how much revenue was generated? If that figure is lower than the cost, you’ll need to ask if it was worth being there are all. Could the same result have been achieved in another, lower cost, way?

The solution
Clearly there are lots of individual spending items involved in thorough monitoring of expenses, but the task can’t be dropped into the basket marked ‘Pending – Too Hard’.

Online expenses software offers the most effective route to accurate and thorough collation of data with minimum time commitment and effort.

The cleverest business expense tracker app will allow you to categorise all expenses under a particular heading, which could, if we stick with the example, be the trade show. It could just as easily be a department, region, or cost centre number.

Once accurate data has been captured it’s available for interrogation. Using it you’ll know how much you spent on that trade stand, and the comparison with revenue earned becomes a simple one.

The cost – or lack of it
Using the right kind of online expense management solution needn’t have a cost associated with it at all. ExpenseOnDemand offers some basic features completely free for as long as you’re a registered user. Others are charged on an ‘on demand’ basis. Turn them on in the dashboard and you’ll be charged for them; turn them off, and you won’t. Employee numbers play a part in the costing too; charges are on a ‘per employee per month’ basis, and there’s every chance that the money you invest in the app could turn out to be less than the money you save. Isn’t that good business sense?

Picture: Karenr | Dreamstime