Excel template for small business accounting
Money Management Tips That Can Help You to Handle Small Business Expenses
Small business expenses are the costs that are incurred in the regular course of business. This cost can be easily applied to small as well as large corporations. Business or small expenses are the main part of the income statement. Business expenses are deducted from the revenue in order to know the net taxable income of the company. There are some basic guidelines about the small business expenses which need to be considered by the company. These expenses will help the business in doing their operation part easily along with handling the business expenditure smoothly.
Types of small business expenses
There are some business expenses that are fully deductible by the company while some are partially deductible. The expenses which cover under the category of fully deductible expenses include:
- Marketing and advertising expenses
- Processing fees of the Credit card
- Training and education expenses of the employees
- Legal, licence, and regulatory fees
- Cost of the insurance
- Supplies and expenses of the office
- Repair and maintenance cost
- Other utility expenses
On the other hand, the expenses which are not deductible are:
- Fines and penalties
- Contribution to political parties
- Lobbying cost.
These are the costs that are not deductible in nature and hence will not create any kind of side effects to the business. But there are many deductible costs which will surely affect the profit of the business. These costs or small business expenses are controlled in the perfect manner so that they will not affect the profit of the business. There are some tips that will help in the easy handling of the expenses without creating any kind of problem in their operation.
Tips to handle small business expenses
Following are some tips that will help in managing small business expenses better:
- Making payment of bills before the deadline- In most cases, business owners fail to make the payment of the bill, which will indirectly relate to the loss of the business. Late fees and interest is added which will lower the credit of the business. In this case, it is the duty of the business owners that they should try to make the payment of the bill before in advance. For this, they have to set reminders for the same along with noting down the bill payment date on a piece of paper and pin on the place which is seen regularly by the owner. It will help in handling the expenses easily.
- Better to set a monthly budget- It is better for the business owners that they should set their budget in advance. In most of the cases, they failed to estimate the expenses they would spend on the business. So setting the budget should be on top priority which will help you in taking strong decisions regarding the spending part. It will also help the business owners to look after the areas which should be improved in a better way. If the business owner is moving according to the budget planned, then they will be able to manage the business efficiently.
- Monitor the spending expenses - The business owners actually don’t know how much spending they are doing weekly or monthly. If they don’t look at the spending part then, in that case, it may give rise to over spending which indirectly relates to misuse of the funds. Most of the business owners are having different accounts and it is the duty of business owners that they should check the status of all accounts along with keeping the records for debit along with credit expenses. This will help the business owners in saving the overdraft fees which is an extra loss for the business.
- Better to separate business and personal funds- It would be better for the business owners that they should separate their personal and business accounts. It will help in making effective use of money. Business bank statements are best when you want to know about the status of the business in terms of profit and loss. You will make one single account for both, and then in that case it may result in overspending along with not meeting the deadlines of the bill. Business owners should move for accounting software in order to monitor small business expenses.
Purchases should be held- If you want to avoid unnecessary cash flow then, in that case, business owners should control making unnecessary purchases till your all-over dues are met. They should wait for some time, until or unless they are having enough cash for meeting new expenses of the business
- Cutting the extra cost to make a profit- in order to make enough money for the business, it is better to decrease the expenses along with increasing the income of an organization. In order to manage the business effectively and efficiently, it would be better for the business owners that they should cut the extra cost by eliminating unnecessary spending. They should cut their extra cost for not looking at the new vendors. Business owners can improve the profit of the business by offering more discounts along with promoting the products in the best way which will attract many customers towards it. Companies should also add new products for sale along with creating loyalty programs that will help in generating more revenue for the business indirectly.
- Inventory management- Business owners must have ordered more inventories for the business which is collecting dust in the room. It would be better for the business owners that they should manage their inventory in the best way which will avoid unnecessary expenses of the business. It is better to track the record of the inventory including purchases along with sales in your books. Business owners must give extra time in monitoring the inventory of the business before they are ordered more in advance.
- Maintain cash reserve- If business owners follow the tips of saving more money it will lead to the improvement of cash flow. But in most cases, there is unseen loss that needs to be paid by the business. It would be better for the business owners that they should maintain a cash reserve which will help you in managing the business effectively. Cash reserves should be maintained by the business owners by opening the business saving account along with depositing some cash for making cash reserves to meet unseen losses.
- Maintain your account properly- when the business is started by the owners in that case they have to keep a record of the income along with expenses. Business owners must move to cloud-based accounting software which will help the business in keeping track of all expenses along with income earned during the particular point of time. This software will help in saving extra cost which is needed to do the work manually for invoices along with filing the income tax returns of the business. This software will help in the automation of the invoices along with filling the returns without creating any kind of problem for the same.
- Set the smart goals- The goals or objectives set by the business should be smart that can be easily achieved by individual or business owners. The smart goals will cover S which means specific, M means measurable, A-achievable, R-Result based, T-Time limited. It means goals should be specific in nature which can be easily measured and achievable. It will also end up with results and should not be time-consuming in nature. Once the goals set are SMART, then the business will run smoothly without paying extra expenses for the same.
- Review your financial report- It is better to keep an eye on the business, which can be easily done with the help of online accounting software. It will help the business in conducting their function smoothly along with drawing up useful reports. It will cover down profit along with loss reports that will show the company income along with losses for the particular period. It will also include a balance sheet that will show the business about its assets along with liabilities and net equities. It will also cover down payable along with receivables report which will tell the position of the business in terms of payment and receiving. The reports on one side will help the business in showing the financial position of the business along with creating an effective selling and buying process.
- Keep a note about account receivable- Business owners should keep a record of account receivable that is the money that needs to be taken by the person against the product or service offered to them. They should make sure to remind the person about paying the amount on time without any delay. If you really want to control small business expenses, then, in that case, it is the duty of owners that they should pen it down on the important paper about the date in which they have to collect the money from the people
These were some money management tips that will help the business in keeping track of the transaction that is held responsible for increasing the overall expenses of the company. It would be better for the owners that they should take the guidance from their family and friends which will give them some special tips as to how they can control the money properly in the business. Today cloud-based accounting has been replaced by manual workers who spend extra time preparing invoices and reports.
It will help in giving the true financial position of the business along with taking necessary decisions about saving time. All the extra expenses should be controlled in the beginning and later on, it should be used for making the small expenses of the business.
Business owners will be offering good products along with services. But if you are unable to meet their expenses, then you will be moving out of the business. It is important for the business along with business owners that they should manage their small business expenses properly and build a healthy business which will provide more benefits to the customers along with employees and owners. Not only this will it help in adding more income to their business which can be used to expand the business properly.