How to Organize Expense Reports for Your Business

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StrategyDriven Managing Your Finances Article |Expense Reports|How to Organize Expense Reports for Your BusinessDid you know that 5% of small business owners get audited each year? While the likelihood of your business getting audited by the IRS is low, it’s still important to keep your business expenses organized. Not only does that protect you on the off-chance you do get audited, but it helps you avoid paying more taxes.

Expense reports are a great way to track how much you and your employees spend. You want to have receipts and documentation to support all deductions you take at tax time.

This guide will discuss how you can track expenses and avoid tax-related headaches.

What Is an Expense Report Used For?

An expense report lists all costs related to running a company. Certain purchases are needed to run a business, such as:

  • Traveling for an event or conference
  • Entertaining and hosting clients
  • Driving your car for work
  • Meals, parking, gas, and hotel costs related to work
  • Supplies and hardware

Many of these costs are deductible when you file your business taxes. However, they need to be documented and organized.

Employees also use expense reports to get reimbursed by their employers. If an employee pays for something out of their pocket, you’ll want to verify that they paid what they’re claiming.

What’s Included in Expense Reports?

Whether you use paper or software to do your expense reports, they need to include a few things. These details include:

  • Date: The date the expense was incurred
  • Cost: The total amount for the expense, including taxes and tip
  • Description: A description of what the expense was
  • Category: What type of expense it was, such as a plane ticket or meal

You can require other details on your expense reports depending upon your needs. Noting what client the expense was for will help you stay even more organized.

Keep Your Receipts

Filling and organizing your receipts is essential to creating expense reports. Your receipts provide physical proof of the deductions your business claims on its taxes.
However, keeping around piles of receipts can take up a lot of room. You also run the risk of losing important documents.

Many programs use AI-based receipt capture to organize expenses. You can take a picture of your receipt with your smartphone. The image then gets uploaded and stored in your expense report system.

Use an Expense Report Platform

A software program is a great way to create an expense report without sifting through a ton of paperwork. For example, Bento for Business uses virtual cards so employees can track their expenses.

Employers can set daily limits for how much their employees spend. Employees can snap photos of their receipts and upload them into the system. Bento for Business then matches the transactions with the receipts, making the expense report process seamless and fast.

Save Time and Money With a Reliable Expense Report System

It’s important to stay organized with your business’s expense reports. Avoid stress around tax time and have the proof for all of your deductions with comprehensive expense reports.

Check out one of our other articles to improve your business’s practices.

Easily Track Your Expenses with These Tips

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StrategyDriven Managing Your Finances Article |Track your expenses|Easily Track Your Expenses with These TipsEnd-of-the-month anxiety hits you when the money starts running thin. Unmanaged and unnecessary expenses are the number one reason behind budget overflow.
To avoid budget overflow, you must practice financial discipline. One way to do that is by tracking your expenses.

Many people confuse expense tracking with budgeting. Though they do overlap, they’re two distinct processes.

A budget is an overview of your expenditure and its limitations, while tracking your expenses provides you with deeper insights into your purchasing behavior.
Cracking the code of your purchasing behavior will help you make better financial decisions in the future.

Not only will you be able to prioritize your spending objectives, but you will also be able to weed out the unnecessary expenses, eliminate them entirely, or at least cut back on them.

Here are 8 tips you can follow to easily track your expenses.

1. Consider Seeking Objective Financial Advice

Despite our best efforts, sometimes financial management can seem like an impossible task to carry out, let alone master. In such situations, instead of winging it, consider seeking professional financial advice.

We are often biased when it comes to our spending habits. We spend when we should be saving or investing. Luckily, if you are struggling with expenses, a financial investment advisor can help you identify the best investment opportunities, so you can make more than you spend.

Not only do they manage your finances and set up your budget, but they also create a customized financial strategy and familiarize you with your best investment options.

2. Observe Your Cashflow

Observing your cash flow is the first step toward managing it – where the money is coming from, is as important as where the money is going.

Knowing your income streams and their schedules helps you streamline your expenses without worrying about late payments or debt.

One great way to observe your cash flow is by checking your account statements. Pinpoint your spending habits by cataloging all your accounts – saving or current.

3. Categorize Your Expenses

Monthly expenses are usually divided into two categories – fixed expenses and variable expenses.

Fixed expenses can rarely ever be trimmed since they are mostly expenses like bills, mortgage, commute expenses, insurance, etc.

Your financial discipline and insight can come into play when managing variable expenses. These can include travel costs, impulse purchases, subscriptions to streaming services, etc.

First, group your expenses into fixed and variable expenses, and then further group them into specific categories like entertainment, commute, department store visits, etc.

Doing so will pinpoint precisely which category is taking up most of your income. It will also help you prioritize the categories that need your foremost financial attention.

For example, if you realize that your bills usually get paid late with an additional late penalty fee, but you never miss your morning Starbucks, then you will know which unnecessary purchase to cut back on to prioritize a necessary expense.

4. Use an Expense Tracker App

Gone are the days when you had to keep a thick ledger to manage your finances and track your expenses. A simple expense tracker app can do it for you.

Most of these apps can also be synced with your accounts to generate a real-time report of your expenses and sort them into categories.

But be careful – these apps are never the ultimate financial solution. Even with these apps, you will have to put in the effort to timely log your purchases, set certain limits, and customize them according to your finances.

5. Track In Real-Time

A major expense tracking mistake is delaying it. Many people would make the purchase and log it later.

Expenses like these get lost under a pile of other expenses and are trickier to pinpoint later.

The best way to avoid such common but frustrating mistakes is to track your expenses in real-time. Take a minute after each purchase and log it in, save your receipts, or simply list it in a spreadsheet.

Doing so will make it far easier for you to get back to it later in the month.

6. Track Your Income

Tracking income is especially useful for people with irregular incomes or side hustles. Tracking your income as it comes into your account is tremendously important.

Your expense planning is reliant on your income. If your income tends to fluctuate, chances are your expenses will have to be tracked and managed dynamically too.

Each month you manage to make more than you expect, set aside a portion of it for when the money will be in shorter supply. You should look to either save or invest the surplus.

While for each month you make less than you expect, you can use the saved-up money to help you past the rough times.

7. Set Up a Budget

Now that you have pinpointed your cash inflows and outflows, fixed and variable expenses, and have a proper record of your expenses, it’s time to set up a budget.

Many people make the mistake of setting up a budget without first tracking expenses and identifying their purchasing behavior.

Doing so only adds to their financial anxiety and troubles, as budgets usually emphasize expense limits rather than expense management.

Setting up a budget after getting all the data related to your purchasing behavior will help you plan for a financially stress-free and practical month.

8. Plan Your Savings

Normally, your income should cover all your expenses. Ideally, once you have paid for all your expenses, you should have some amount left.

Those are your savings – when it comes to saving, people have varied attitudes toward it. Some like to spend it, some put it in their saving account, while some like to roll it forward to the next month.

What is yours is yours, and you are free to spend as you like, but with a little effort in assessing your financial needs, you can better enjoy your splurge money guilt-free.

The Bottom Line

There is no hard and fast rule when it comes to tracking your expenses. People go through a wide array of financially tricky situations and what works for one, may not work for the other. The above-mentioned tips will help you assess your expenses and income objectively and make intelligent decisions to achieve a financially stress-free month.

Save Money on Maintaining Your Business Equipment

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StrategyDriven Managing Your Finances Article |Business Equipment|Save Money on Maintaining Your Business EquipmentYour business most likely needs some type of equipment to enable it to run. It could be office equipment that you need, or perhaps you need power tools or large machinery. Whatever the equipment is, you need to keep it in good condition so that it helps you to run your business efficiently. That requires regular maintenance so that you can avoid problems that might shut down your business unexpectedly. Maintaining your business equipment can get costly and take a lot of time too. However, there are ways to save money and even save time on taking care of your essential equipment.

Learn Some Maintenance Skills

Some people might decide that the best way to save money on equipment maintenance is for them (or their employees) to learn some maintenance skills. There are often maintenance tasks and repairs that you can do yourself, rather than calling out a service to have it done for you. Knowing how to fix a printer jam or get the parts to fix your tractor could save you a lot of time and money. Plenty of basic tasks can be completed by just about anyone, so it’s a waste of money to get someone with experience to do it for you.

Prevent Instead of Repair

Making repairs to your equipment can be pretty expensive, especially when extensive repairs are required. If you want to avoid expensive repairs, one of the best things that you can do is prevent problems in the first place. Good maintenance can help you to avoid the need for repairs by keeping your equipment running smoothly. Even just keeping your equipment clean can be a smart way to maintain it and prevent any issues that might require costly and time-consuming repair. Create a schedule of maintenance and servicing for your equipment to keep everything running.

Hire Some Equipment

The more equipment you own, the more you have to maintain. But you don’t necessarily have to own all of the equipment that you need to use. You might only need to use a piece of equipment a couple of times a year, and the rest of the time it could be taking up space while being neglected. If you don’t need something very often, consider hiring it instead. You’ll have to take care of it when it’s in your possession, but you won’t be responsible for its long-term maintenance. Plus, it can save you money.

Know When to Replace

As an asset gets older, it can require more and more maintenance. Eventually, you could end up spending more on maintenance than the cost of replacing the item. Knowing when to replace something instead of continuing to repair it is essential if you want to save money on your business equipment. Having to carry out constant maintenance and repair not only wastes your money but also wastes your time, so make sure you consider whether replacement is a better option.

Maintaining your business equipment should be affordable. You can save money if you need to maintain equipment more efficiently.

5 Ways Invoice Factoring Can Offer Quick Financial Solutions to Your Business

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StrategyDriven Managing Your Finances Article | 5 Ways Invoice Factoring Can Offer Quick Financial Solutions to Your BusinessSmall or established businesses need effective cash flow to run their operations. However, maintaining a proper cash flow can prove hectic with the market and economic changes. A business should seek alternative funding to keep its operations active and productive. Besides applying for a loan, businesses can utilize invoice factoring as an alternative financing option. Pointed below are the ways invoice factoring can offer quick financial solutions to your business.

Offers Financial Flexibility

It is prudent for your business to maintain flexibility in cash flow. Your business needs to fund its operations and sustain its workforce despite hard economic times. Invoice factoring financing becomes vital as it offers your business the flexibility it deserves. You can use the unpaid invoices to get the funds you need at any time. You, however, need to find and work with a reputable factoring company to enjoy the flexibility. Remember, invoice factoring makes cash available to your business and helps avoid financial struggles that might affect its operations in the end.

Helps You Save Time and Resources

Note that applying for a bank loan means waiting for days before getting approval. The approval chances are also minimal, and your business can get affected as you wait for the approval. Most banks and credit unions also dictate that you provide collateral to process the loan. This, in the end, can be inconvenient, especially to a struggling business. However, using your unpaid invoices to secure funds saves time and resources. You avoid worrying about collateral and wasting during the application process.

Easy Application Process With Higher Financial Approval

Financial history, credit score, and collateral determine your chances of getting a loan approved by the bank. You must meet the criteria and the requirements for your business to get the funds it needs. This is, however, different when you consider invoice factoring. You don’t need to worry about collateral or your financial history to get approval. You only need to show your financial history to the customers. The factoring company needs to be confident about the payment history before taking your unpaid invoices.

Credit Control

Collecting your payments and managing the credit can have different impacts on your business. You need to be effective with debt collection to keep your cash flow steady. It is, however, hard when you have to deal with sneaky customers. You get quick financial solutions by considering invoice factoring as you avoid the stress of dealing with your customers. Note that the factoring company you sell your invoices to handles the payment collection process and credit control. You get more time and space to manage your business.

You Use the Funds for Any Business Purpose

Unlike other forms of loans, invoice factoring provides you with the funds to use for any business needs. There are no restrictions or conditions on where and how to use the funds. You can improve your working capital, fund expansion, purchase new stock and equipment and add more staff with the funds you get through invoice factoring. You enjoy financial freedom by working with a reputable factoring company.

It is crucial for a business to maintain its cash flow for its operations. However, it can prove hectic when you lack a proper financing avenue. As much as applying for loans can prove beneficial, the process can be overwhelming. You need invoice factoring to get quick financial solutions and enjoy other benefits, as highlighted above.

How can surety bonds benefit small businesses

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StrategyDriven Managing Your Finances Article |Surety Bonds|How can surety bonds benefit small businessesIf you are a small business owner who is competing for contracts, you will need to demonstrate that you are qualified to perform the work that will be required under the contracts. Depending on your type of business, you might also be required by the state to obtain a license to legally operate. A common state requirement for licenses to operate different types of businesses is a surety bond. These are state-specific, so if you live in Florida, you’ll be required to get a Florida surety bond. Even if your business is not required to get a license, purchasing a surety bond is a good way to demonstrate that you are capable of performing work and can be trusted to meet your contractual obligations.

What Are Business Bonds?

Business bonds or commercial bonds are types of surety bonds that might be required for licensing or for entering into a contract. They are legally enforceable agreements between the following three parties:

  • Principal – The business that is required to purchase the bond
  • Obligee – The party requiring the principal to purchase a bond, which can be the government or a private party
  • Surety – The company that issues the surety bond and guarantees the principal’s performance and legal compliance

Surety bonds are required for many different types of businesses to obtain licenses and legally operate. If the small business that purchases a surety bond fails to complete the work or violates the law, a claim can be filed against the surety bond. The surety company will then pay any valid claim, but the principal will ultimately be responsible for the costs and will be required to reimburse the surety company.

Common Types of Businesses for Which Surety Bonds Are Required

Many different types of businesses are required to purchase surety bonds to obtain licenses. Some of the common types of businesses for which surety bonds might be required include the following:

  • Auctioneers
  • Notary public services
  • Auto dealers and dealerships
  • Travel agents
  • Construction contractors
  • Mortgage brokers

According to the U.S. Bureau of Labor Statistics, 21.8% of adults employed in the U.S. had licenses from their respective states in 2018. Since bonds are a licensing requirement for many different types of businesses, this demonstrates how common bonding requirements may be.

Construction bonds are particularly common. Congress passed the Miller Act in 1935. This law requires contractors who want to perform work on construction projects on federal buildings to have surety bonds for any project worth more than $100,000. At a minimum, contractors that want to perform work on federal buildings must have performance and payment bonds. States also have laws that are similar to the Miller Act and establish different state thresholds for public projects.

Common Types of Bonds for Small Businesses

Some of the common types of bonds small businesses might need include the following:

  • License bond – Bond required by the state for licensure
  • Permit bond – Bond required by a municipality to obtain a permit
  • Bid bond – Bond required by the government in order for contractors to submit bids on projects
  • Performance bond – Bond required by public or private project owners to guarantee a contractor will perform its contractual duties
  • Fidelity bond – Bond a small business owner might purchase to protect the business from losses caused by employee theft or fraud
  • Auto dealer bond – Bond required for auto dealers that intend to sell more than a minimal number of vehicles per year
  • Business service bond – Bond that protects a small business’s customers from employee theft or fraud

How Surety Bonds Work

Business owners who are required to purchase surety bonds can apply through a surety company. The business will be required to submit multiple documents with the bond application to allow the surety company to evaluate the business and its risk.

Surety bonds are not insurance and instead function as a form of credit. This means that you will need to go through an underwriting process before the surety company will issue a bond to you. The surety company will review information about your financials, including your business’s audited financial statements, profit and loss schedules, the resumes of key stakeholders, your business’s organizational chart, and your business and personal assets and liabilities. It will also look at your credit score and compare the size and value of past projects to the one that your business wants to bid on.

If the surety company believes that your business poses too great a risk because of problematic credit, poor performance in the past, or evidence of poor character, it will likely deny your bond application. This makes it important for you to operate your business in an above-board manner and keep your credit in good standing.

The surety company will provide you with a free quote if you pass the underwriting process. The quote is for the bond premium, which is the amount you will have to pay to purchase the bond. The bond premium is typically a percentage of the total bond amount and can range from 1% for experienced business owners with excellent credit to 15% for businesses with little experience or problematic credit.

If you accept the free quote and pay the bond premium, you will also have to sign an indemnity agreement. This means you agree to indemnify the surety company for any valid claims that might be filed against your bond.

Benefits of a Surety Bond for a Small Business

Surety bonds offer several benefits for small businesses. When you are approved for a bond, it functions as a prequalification and demonstrates that your business is stable and able to perform the work as promised and in compliance with the law. Having a surety bond might demonstrate that your business is trustworthy and encourage others to contract with you.

Surety bonds also protect other parties beyond the obligee. For example, if you own a construction business, your bond will also protect the suppliers and subcontractors that you contract with, so it might be easier for you to find subcontractors and suppliers that are willing to work with you. Surety bonds also provide you with access to more valuable projects.

Many businesses are required to purchase surety bonds by the state to get licenses to legally operate. Others may be required to purchase bonds to perform work on specific types of projects. While purchasing a surety bond is another expense for small businesses, doing so can help you to demonstrate that your company can be trusted to perform its work ethically and legally.