Most businesses are aware of the importance of keeping track of finances and spending habits, but many battle to implement and record them accurately. This is because it often seems like an overwhelming or tedious task but in the end, it’s always worth it.
Tracking your business expenses on a day to day basis can help you to save a lot of money simply by allowing you to figure out WHERE all of it is going each month. It is also important to remember that keeping a budget is not about deprivation but rather about being proactive in the use of money and enabling better business decisions when spending it.
A budget is a great instrument for making financial decisions and here’s how you can get started tracking your business monthly expenses:
- Check your Account Statements
Regularly checking your accounts will help you to pinpoint spending habits. It’s a good idea to get a thorough sense of monthly cash flow and take inventory of ALL your accounts.
- Categorise your Expenses
Start grouping your business expenses into categories. Fixed expenses will be less likely to change each month so start by focusing on the variable expenses to see where spending costs could be reduced or adjusted. It is also advised to keep up to date with any contracts or retainer agreements you may have, which will fall under and impact monthly expenses. For example, even though a retainer can benefit you and your business by enabling a much more hands-on approach, it is also the single most important document that defines the relationship between client and service provider. Which is why you should be asking yourself when you last reviewed it. Some important elements to include when writing up or reviewing a monthly retainer include:
- The Scope of Work
Does the agreement accurately and specifically define the work that is to be performed (or not performed)? This needs to be detailed and clear in order to prevent future confusion and discord.
- Time Limitation
The retainer should specify the time period it will remain valid for (i.e. 2 weeks, one month).
- The Fee
This will need to include the frequency, timing and method of payment as well as the responsibility for payments.
- Responsibilities of involved Parties
The obligations of both the client and service provider should be set forth in terms of responsibilities, responding to requests and general cooperation’s.
- Grounds for withdrawal
This also includes the consequences for breach of the agreement. It is important to clearly specify the procedure for notifying either party of the intention to withdraw.
Staying up to date with contracts and agreements means greater financial control and awareness over your spending.
- The Scope of Work
- Keep your Tracking Consistent
These days there are plenty of budgeting apps designed for on-the-go money management but will only work if you are willing to regularly log each transaction, put in the time and stick to the business budget. It will be challenging in the beginning but once it becomes a habit, it will become less tedious and your business will ultimately benefit. Otherwise, find a decent budgeting template online and plug in the numbers there.
- Identify room for Change
Tracking your business finances will require room for adjustment as you start to uncover what’s really costing you and what is not as bad as you thought. Finding ways to lower the big fixed expenses in your life such as the cost of business vehicles and utilities, can have a large impact on your budget.
It’s never too late to set up a realistic budget and spending plan. Establishing your business budgeting habits will ensure better financial decisions, greater spending awareness and ultimately create peace of mind.
We would like to help you with this aspect of your business to make sure you are on the right track. Contact one of our trusted advisors by emailing email@example.com and we will get in touch with you right away.