The first step towards a stress-free and successful trade business is implementing simple and scalable methods to track your business expenses. This can be as simple as incorporating a job management system that allows you to track your finances from the initial quote to the final invoice. Finding practical strategies for tracking expenses and maintaining financial health is key to growing your trade business. It also makes filing your taxes quicker, easier, and more affordable at the end of the financial year.
Keep your finances in check with our Free Cash Flow Template!
Many business payments, including utilities, rent, insurance and payroll, follow a monthly cycle. By establishing a routine of monthly expense tracking, you'll know the foundation of your expenses and be able to plan accordingly. By consistently reviewing your basic financial commitments, you're better set up to ensure there are no surprises in your budgeting process.
Getting into a routine of tracking your expenses throughout the month also helps to keep on top of outstanding invoices. Leaving invoices unpaid or ignored for several weeks can lead to major headaches down the line - no one needs a call several months after the jobs wrapped up to confirm how many nails you used.
By tracking your expenses month by month, you give yourself enough time to gather a clear picture of your finances, without waiting so long that it's impossible to reconcile any issues.
Failing to plan is planning to fail! By proactively gathering a clear view of your financial situation, you ensure you can respond to financial challenges.
Clear financial records are also crucial should you ever need a business loan or plan to sell your business. Expense tracking also ensures that you're not leaving money on the table by overlooking deductible expenses or misjudging your financial health in the lead-up to tax season.
When it comes to tax season, preparation is key. By taking the following steps, you can simplify the process and possibly reduce your tax liability:
Maintaining orderly records year-round simplifies tax return preparation and can also significantly reduce accounting fees.
Need more help? Try our guides to make sure your business is prepared come tax season:
Accurately tracking your expenses identify and eliminate wasteful spending habits in your business. Even if you’re in the ‘green’, tracking your business expenses is critical to identify areas of waste, see which areas or services are bringing in the most revenue and provide important information.
For trade businesses and service providers, cash flow management is paramount to developing a successful trade business. Effective expense tracking improves cash flow – it enables businesses to anticipate and plan for upcoming expenditures, avoid cash crunches, and maintain a healthy balance between receivables and payables. This is where techniques like the 'Small Business Break Even Analysis' come into play, offering a clear picture of what needs to be achieved in terms of sales or services rendered to cover costs and start generating profit.
Knowing how to keep track of your business expenses is critical to ensure you don't miss important information. Streamlining your process helps make sure your business is tracking expenses in a way that saves you time, energy and money, rather than adding unnecessary admin and stress to your schedule.
In order to ensure your business expenses are kept separate from your personal finances, step one of accurately tracking your business expenses is to open a business bank account. This is often split between a:
Tradify makes tracking your business expenses easier by allowing you to seamlessly record all your financial information from quotes, staff, material costs and invoices. Tradify's cost estimating software allows you to easily add supplier price list items and billing rates for your workers. You can track predicted costs in your Quotes to actual costs incurred on a Job. Tradify also offers powerful tools to keep track of time worked. You can easily add time worked on jobs with manual timesheet entries or use our live timer. Additionally, you can add different billing rates to differentiate between your types of work or experience levels.
Tradify integrates with most major business accounting software, reducing the need for manual expense reporting or doubling up on admin!
The best accounting software to help keep track of your business expenses will have a clear interface, be straightforward to use, seamlessly integrate with your job management software and reduce the need for doubling up on manual data entry.
Popular options include:
No one wants to spend their evenings manually entering every expense from your bank account into a separate system. Not only is that time-consuming, but it also increases the risk of oversight - which may add up to cause miscalculations of expenses or profits down the line. Most accounting systems have the opportunity to sync with your bank account
It’s a simple step, but often the one that poses the most challenges. Track all expenses, including your mileage, flight expenses and meals. Make sure everyone is your staff understands and follows a clear system for logging and categorising business receipts.
Accurate reporting only gets you so far. As a business owner, it is part of your responsibility to determine where and when your finances are allocated. Reviewing your business allows you to see how much you spend on specific areas, how the expenses accumulate, spot outliers and identify cost savings.
A business budget is a spending plan that estimates the revenue and expenses of a business over a set period of time, typically monthly, quarterly, or yearly. The business budget follows a template, which you can fill in with an estimated sales forecast, profit margin, and expected revenue, plus any recurring or expected business expenses.
No matter how you present your budget, whether in a graph or spreadsheet, it will typically include;
When it comes to business budgets, it’s not one-and-done. Regularly updating several types may be helpful in your business and provide a more accurate overview of your finances.
This type of budget uses inputs from financial statements, your projected cash forecast and your financial plan to create a single document. Your team can then use it to plan how to reach your business goals.
This budget shows your projected revenue and expenses for a given period. The operating budget includes fixed and variable costs, as well as non-operating expenses. Capital expenditures are usually excluded from an operating budget. Each line item should be backed up with key details.
The operating budget gives you a reality check on whether you’re following your pre-set budget. While this budget is often prepared at the start of each year, don’t set it and forget it. By updating it monthly, you're set to avoid any uncomfortable surprises.
Companies sometimes create a capital budget when they are looking to make a large purchase, such as a large piece of equipment, expensive tools or a new technology system that will require a substantial investment. This allows the team to determine the impact on cash flow and plan accordingly.
This document will give you an estimate of how money comes in and goes out during a set timeframe. You create a cash budget using the statistics you draw from sales forecasts and production, and by estimating payables and receivables.
If you hire employees, this type of budget helps plan for the money you’ll need to meet payroll, not only for regular employees but also for any contractors or apprentices.
Get your admin sorted and start experiencing the benefits of an organised business. Sign up for a 14-day free trial with Tradify. No credit card required. No commitment. Or pop over to one of our live demo webinars to see Tradify in action.
This article is not intended as financial advice. Always check with your accountant before making any changes to your business expenses or financial plans.