Running a small business means dealing with expenses every day – from office supplies to staff salaries and software subscriptions. These are considered your business expenses, and it’s crucial to manage them to stay compliant, keep your business books accurate, and make informed business decisions. However, what is a business expense, and how can you monitor it properly? In this blog post, we’ll discuss every aspect of business expenses.
What is a business expense?
A business expense is any cost you incur when you run your business. It can cover essentials that help keep your company running, or costs that help you generate revenue. In most cases, business expenses are tax-deductible, which means you can subtract them from your taxable income, but only if they meet some conditions and are recorded correctly.
What are the common types of business expenses?
When it comes to business expenses, you must be aware of what types of expenses can be considered business expenses. Take a look at the section below to know what counts as a business expense in Australia:
- Operating expenses: Utilities, rent, insurance, and office supplies
- Employee expenses: Superannuation, wages, staff benefits, and training
- Advertising and marketing: Sponsorships, campaigns, and digital ads.
- Travel and entertainment: Accommodation, flights, client meetings, and meals.
- Software and technology: Apps, subscriptions, and IT equipment
- Professional services: Accounting, legal, and consulting fees.
Why is it important to manage business expenses?
Keeping track of accurate business expenses is not just about compliance, it’s about controlling business finances. By getting bookkeeping services in Melbourne for your company, you can stay on top of business expenses that will help you:
- Improve accuracy in financial records
- Avoid missed tax deductions
- Identify overspending early
- Avoid missed tax deductions
- Manage cash flow
How can you track business expenses accurately?
Good expense management makes it easier for you to stay on top of your business expenses. Here are some practices to track business expenses:
- Use accounting software: Make sure to use accounting software that automates business expense tracking. Accounting software can keep digital copies of receipts.
- Get expert assistance: You can keep track of your business books better if you get expert assistance from bookkeepers or accountants in Melbourne for your company.
- Set clear budgets: It’s always suggested to set clear budgets to control spending. If you want to stay within your budget, then make sure to set realistic goals and clear budgets.
- Keep receipts: It’s essential to keep and store receipts digitally to avoid missing documents.
- Track both small and large spending: Keeping an eye on both small and large spending is crucial. You must look at the big picture of your company’s spending, so you can decide where to invest and where you should reduce your spending.
- Review your business expenses daily: It’s crucial to review your business expenses daily, don’t wait until tax time.
Benefits of Monitoring Business Expenses
Keeping track of your business expenses has various benefits, such as:
- If your financial statements are correct and have an accurate bank reconciliation statement, you will be ready for anything, like lodging taxes.
- Being clear about your business expenses can help you check out where you can reduce extra expenses in your business to make more money.
- You can claim many small business deductions by deducting eligible business expenses. This can reduce your net income. When tax time arrives, if you have accurate records, you will have proof to support your claim for tax benefits.
- Make sure to look at your spending patterns and make accurate financial reports to find patterns. This can help you make informed changes and plan more effectively for the future.
- If you keep an eye on your spending patterns, you can detect fraud easily before getting into big trouble.
Conclusion
Now, you know what you need to keep an eye on your business expenses. The best method is to obtain reliable bookkeeping services for your business, as our bookkeepers will ensure you have accurate records, allowing you to track the exact cash flow of your business.