How To Track Expenses Using Your Invoicing Software
Inadequate management of cash flow is the chief cause of failure for small businesses, making the process of tracking outgoing expenses absolutely crucial. You can avoid wasting time (and money) on tedious accounts payable (AP) tasks and track all relevant expenses by using invoicing solutions.
Here are three ways that tracking expenses can help:
- Cash flow management
- Preparing for tax audits
- Eliminating errors
While it is important to know how much money comes into your bank account, knowing how much is spent is even more crucial for financial stability. Read on to learn about six proven ways to track your expenses, how to avoid invoicing mistakes for your business, and keep on top of the often overlooked topic of spending in a small company.
Connecting Your Bank Account
In order to establish a hassle-free process of keeping track of spending, you can link your bank account with the best billing software. By connecting your account, you can improve the efficiency of the accounts payable process. Your expenses will also be updated every day, synced with your business bank account, and conversions of multiple currencies can be handled.
Here are two automatic invoicing providers that can help with this task:
- FreshBooks: Automatic expense importing for small enterprises eliminates manual data entry.
- QuickBooks: Downloads expenses on its own based on your account settings for up to 90 days.
It is recommended that your business bank account is separate from your personal account, even as a freelancer, in order to track business expenses properly.
One of the biggest challenges of accounting is storing and accessing receipts easily. With software that tracks expenses, you can store copies of your receipts automatically on the cloud. This is useful as it enhances accessibility and organization, which would be nearly impossible to achieve manually.
Two top invoicing solutions that enable you to take a photo of any receipt and log it as payment proof alongside your expenses records are FreshBooks and Invoice2Go. Also, when you scan and record data from receipts, the report is digitized instantly. This saves time and money you might otherwise spend on manually recording or inputting the data.
The Internal Revenue Service mandates the categorization of tax expenses. With a good invoicing solution, expense segmentation is included free of charge. It can help you generate expenses reports automatically, based on different tax categories for audits.
The following leading providers offer AP categorization:
- Tipalti: Supplier network categorization is embedded to simplify expenditure management.
- FreshBooks: With over 13 tax categories, you can organize outgoing transactions based on local tax regulations.
Switching to a platform that can categorize big-to-small expenses is ideal for generating accurate account records within minutes. For instance, if it takes one hour every day for your accountant to segment expenses into categories, you can save up to 25 hours of billable work a month.
Easy Billing For Expenses
Whether you are invoicing for international clients or domestic customers, this software makes it easy to bill clients for various company expenses that should be covered by them.
Here are four solutions that come with features that conveniently allow you to bill clients for expenses:
- QuickBooks: On this platform, you can add a billable expense to the client with a markup rate, sales tax charge and bill payment terms that can be paid directly by the client.
- FreshBooks: You can save time by taking a picture of the expense invoice to receive reimbursements directly.
- Invoice2Go: Business owners can use an iPhone, iPad, Android device or web-browser for activating billing expenses based on currency or percentage markups.
Tracking Project Spending
With software that keeps a tab on multiple pools of expenses, you can assess total expenditure per project. This is especially useful for freelancers and small enterprises with multiple projects on the books as it gives a clear idea of the project status and its budget.
Here are some solutions that can help in tracking project expenses.
- QuickBooks: this invoicing platform is known for its ‘Projects’ feature that includes profit-loss reports in addition to a budgeting feature.
- Xero: by using Xero Projects, admins can track time and costs to determine profitability using Android or iOS on an unlimited number of projects.
Recurring Spending Mechanism
Repeating payments are ongoing costs to run a business. By tracking your recurring expenditure, you can identify them easily and get insightful reports on your fixed expenses.
Take a look at the following three companies that offer recurring expense tracking solutions:
- QuickBooks: Admins can generate repeating expenses on this platform with custom intervals and payment options to save time.
- Invoice Ninja: Users find it easy to enter recurring expenses here in addition to running profit-loss reports that can encourage you to save money in the long run.
- Xero: Users can create repeating expenses under the recurring billing category on this software.
When you track expenses alongside incoming funds, you can manage cash flow more efficiently. Through simple steps such as connecting your business account, using repeating expenses, digitizing receipts, and segmenting spends by tax category or invoicing billable expenses, small businesses and freelancers can manage their finances better and gain a clearer understanding of their financial situation at any given time.