6 Reasons Expense Tracking Software is Important
6 Reasons Expense Tracking Software is Important:
Expense tracking is important at all stages of a business. In the beginning, it might not seem as crucial, especially if you incur few expenses. However, if you’ve ever lived wondering just where all your income went over the past month and why you have nothing left over to save, you’ll likely experience that same feeling in your business when you don’t track expenses. For a greater understanding of its necessity, here are six reasons expense tracking is important:
#1 Makes Tax Time Less Stressful
If you don’t routinely track your business expenses throughout the year, you will have to hunt for the information and take the time to record everything from the past year. Obviously, this will be stressful and cause extra work. Few people enjoy the process of filing taxes, so the quicker you get them done, the better. By tracking your expenses, you won’t have to spend a lot of time on reporting taxes.
#2 Don’t Miss Out on Any Deductibles
Another problem with failing to record expenses is you’ll miss out on possible deductions come tax season. That’s money you’re leaving on the table. To save as much money as possible on taxes, keep up with your expenses.
#3 Accurately Determine Budget Cuts
Sometimes a business needs to make budget cuts due to overspending or not making as much revenue as expected. Whatever the reason may be for budget cuts, you need to have an accurate history of your business’s spending in order to make an informed decision. Without keeping track of expenses, you could potentially make a harmful budget cut while ignoring an area that doesn’t really need as much investment.
#4 Thinking About Money Helps Generate More
A habit of people in debt or living paycheck to paycheck is to largely ignore their finances. They don’t check their bank accounts on a regular basis, and often don’t know how much they have available. If you track your expenses, it forces you to regularly think about money rather than ignore its inflow and outflow. By facing your expenses, you will become less fearful of financial issues and stay on top of finances. As a result, you may notice your income grow.
#5 Become More Disciplined
Discipline is an important skill for business owners to have, because customers will lose trust in you if you fail to do what you were supposed to. You must also have the discipline to work on your business even when you don’t feel like it in order to maintain momentum. Discipline is difficult to build but one way of doing it is to stay on top of your expenses.
#6 Increased Productivity and Willpower
Some experiments on tracking spending found that people become more productive and conscious in all areas of their lives when they get into the habit of monitoring their expenses. According to Duhigg in his book The Power of Habit, “As people strengthened their willpower muscles in one part of their lives — in the gym, or a money management program — that strength spilled over into what they ate or how hard they worked. Once willpower becomes stronger, it touched everything.”
The benefits of expense tracking are too good to give up. Keeping track of your finances, both personal and business, is essential for having a healthy financial mindset. You’ll save more money by staying aware of how you’re spending it and having the data at hand for tax deductibles. Moreover, you’ll make smarter financial decisions for your business and increase your productivity in multiple areas of your life.
You can easily get started tracking your expenses with CloudBooks, an invoicing software that enables you to stay on top of your business’s finances. If you have any questions or comments about our software, please contact us and we will get back to you.