TRACKING BUSINESS EXPENSES: THE ULTIMATE GUIDE FOR BEGINNERS

Getting your small business to turn a profit requires a constant balancing act. You need to aggressively focus on maximizing your income while consistently tracking business expenses. At Peak Utility Brokers we understand the process can sometimes seem overwhelming, especially for a new business. But keeping a close eye on expenditures and managing your expenses will increase profitability. That’s why we’ve put together this practical guide to explain what you need to know about business expenses and how to track them. 

Definition of Business Expenses
The term “business expenses'' broadly covers the costs that generally arise during ordinary business operations. Whether you’re a small business or a giant corporation, business expenses are a universal concern. Some common examples of business expenses include marketing, bank fees, equipment, insurance and utilities. Employee benefits and office supplies are also considered business expenses. 
Which Expenses are Tax-deductible?
In any for profit business, a portion of the company’s expenses will be tax-deductible. Properly deducting expenses from your taxable income is a key factor in lowering your taxes. However, it’s important to know that not all business expenses are tax deductible. According to the Internal Revenue Service (IRS), a deductible business expense must be “ordinary and necessary.” Ordinary expenses are costs that would be considered common to your trade or industry such as mileage for a delivery company. Necessary expenses are costs that are appropriate for the operation of your business like rent or business-related licensing fees.
Importance of Tracking Business Expenses
There are a variety of methods to track business expenses. In order to manage your business adequately, you will need to create an expense tracking system that works for you. If you’re a freelancer, or self-employed it’s especially important to keep detailed logs. Regular monitoring of income and expenses keep you up to date on business operations. This allows you to make real time adjustments to budgets and react to business needs with ease. Good financial records can provide an accurate picture of the health of your company and help to identify areas for opportunity or improvement.
Easily Track Business Expenses
Making a commitment to track expenses may mean changing the way you approach your company’s operations. However with a few key components in place, you’ll get a better picture of your company's financial wellbeing. Whichever method you choose for tracking expenses, there are a few key points that every good strategy should have. 

• Business Financial Accounts
  It’s important to keep business and personal expenses separate. This allows your business to stand as a distinct entity that is separate from your personal finances. A business bank account can help establish business credit, useful when applying for a business loan. It also helps to protect personal assets in the event of an audit, lawsuit, or bankruptcy. Note that sole proprietors are not required to open a business bank account, but LLC’s, partnerships, and corporations must. 
• Properly Store Receipts
  There are plenty of solutions for storing and organizing receipts, choose from, envelopes or files. It doesn’t really matter as long as you have a system. Don’t forget to write on your receipts what the purpose of the purchase was. After all, a receipt for a sandwich means nothing if you don’t remember having that client lunch six months ago. If you (like most of us) live in a digital world, there are also receipt apps that allow you to scan in paper receipts for cloud storage. The IRS requires small businesses to keep their paper receipts, and any other supporting documentation like bank statements, for at least three years.

• Choose Your Tools Wisely
  Electronic reporting tools can make the laborious task or compiling expense reports a thing of the past. If your company operates out of multiple bank accounts or needs to track travel expenses for multiple employees, you may want to consider accounting software. For smaller companies, with simpler expense reports standard spreadsheet software can handle the task. If you’d rather not track expenses yourself, a professional bookkeeper can perform this sometimes arduous task for you. There’s no wrong answer, choose what works best for your business. 

Final Thoughts
Tracking expenses is an integral part of successfully running a business. Choose the tools that best suit your business needs. Once you’re able to track your expenses efficiently, you’ll be able to better optimize them as well. One of the best ways to optimize your business expenses is to reduce your operating costs. Peak Utility Brokers offers credit card processing and utility rates that can potentially save your business hundreds of dollars in expenses every month. To learn more about our services and benefits, get in touch with us today!