Being the owner of a small catering business, I’ve always struggled with staying within my budget. Until one day, when I spoke to a successful business owner who suggested that I keep track of my expenses and profit. So it got me brainstorming ways to keep track of expenses and profits in the easiest, most efficient ways.?
It turns out you can keep track of your expenses and profits in several ways. You can write those tiny bits of changes and then calculate them yourself, or you can try out some sort of dedicated software. It’s all out there.
If you are a small business owner who wants the best for your business, you must monitor your cash flow.
However, keeping track of your expense and profit could be challenging if you have never done it before.
We have put together a detailed guide below that will help you keep track of your cash flow.
Let’s get started.
Tracking your expenses is very important to make sure that there is no negative cash flow. Keeping track of all your expenses might seem a bit complicated, but it can be done swiftly and easily with the right tools and actions. One of the best ways is to implement utility bill management services.
The thing is, nowadays, time is money. And people, in general, don’t like to spend that much time tracking transactions. Moreover, as we now have different inventory management tools like Track a Haul, people opt for the easier way around it.
Still, to make everything clear, we’re guiding you through some steps here. Now, let’s get on with it.
If you’re using your personal bank account to manage transactions for your business, then it is high time you stop doing that and open a business bank account.
Using the same account for your personal expense and your business’s expense can mess up your expense calculation. But while opening up a business bank account, you need to pick your bank and services carefully. You need to analyze the bank charges, rewards, incentives, and other benefits before moving forward. Most services will try to grab your attention with fancy taglines or over-the-top benefits. But you shouldn’t let that sway you.
To get the best possible service, you need to research several banks and assess their monthly charges and extra transactional charges that might impact your profitability. You also need to check if the bank can help you with future loans and credits. And if you’re interested in added benefits and rewards, you need to weigh them with other fees. So, you can see if they are worth sacrificing other services.
Having a business bank account is good for managing your expenses, but if you categorize your major expenses, it is easier for you to form a budget and keep a tab on it. Categorizing your expense will make it easier for you to determine how much money you have allocated to spend for which reason.
Although categorizing expenses differs from business to business, we noted a few of the main categories below.
It is important to identify which clients are more profitable for your business. For instance, if you run a catering business and every other month, you get the same client complaining about the food not being to their taste. They might ask you to remake your product while simultaneously using this as an excuse not to pay you. This client may end up costing you more to keep than to let go. Thus, losing this client is better for your business.
Clients like this make you spend more resources on their services without getting an equivalent monetary benefit.
Sometimes it’s better to lose some clients and concentrate on those who don’t require extra spending. If that idea doesn’t appeal to you, rethink your pricing strategy and deal with clients.
The main goal of a business is to generate profit. So it is important to keep track of it.
Invoices help you do that, but many companies don’t emphasize this important document. As a result, many vendors often have to call up many clients and enquire about invoices done months ago. This kind of situation often leads to negative cash flow.
Therefore, it’s important to design clear invoices that do not lack any information.
Invoices should have specific and detailed data that should not leave any room for misinterpretation or confusion. It should include the following things.
A ‘P&L’ or profit and loss report is an important document that shows how much a company earned in revenue and lost in expense in a specific period. Generally, this report is done in intervals like monthly or quarterly. But it can extend to a year depending on the company.
Creating a profit and loss report will be easier for you to make wiser decisions for your company. As this report shows where your profits come from, you can emphasize one sector if you see that is more beneficial. Similarly, if one factor is causing too much expense consistently, you can modify or get rid of it. A ‘P&L’ report is a great tool to generate more profit and avoid loss.
We hope you got your answer to how to keep track of expenses and profits. If you follow all of our guidelines mentioned above, you will be able to balance your profits and expenses swiftly.
We tried our best to provide you with all relevant information that might help you.
Thank you for being patient and reading till the end.