What Business Expenses Should You Be Tracking?

Your business expenses list is or will be overwhelming! The best thing you can do is track all expenses to be sure all payments are timely and consistent. We detail six areas to watch to reduce expenditures by making improvements...

The Business Expenses Management Checklist For Busy Small Business Owners

As a business, tracking your operating costs helps determine your profitability potential. It also offers an opportunity to review, adjust or scrap financial decisions that impact your business. Tracking can be done:

• Daily
• Weekly
• Monthly
• Quarterly

The timing is entirely your choice and may also depend on the type of business you own or lead. According to reports, only 30% of small businesses remain in business for over a decade. Perhaps, effective expense tracking plays a vital role here.

What business expenses should you be tracking? We provide a list of six below.

1. Taxes

The primary purpose of taxes is to raise revenue for the government to keep the country's institutions running. As a business, you have a primary duty to contribute ... and do it promptly.

After paying, it would be in your interest to track these expenses. Usually, when there is a finance and accounting team or department, everything related to taxes is handed over to them.

While this may take pressure off of the business owner, it is not advisable to take a completely "hands off" approach regarding these payments. It is recommended to oversee all physical and soft copy tax records the company makes.

Set a schedule for reviews with your team so you can stay aware.

2. Insurance

Business insurance is a legal requirement and should not be regarded as optional. Its overall purpose is to provide protective financial cushioning for a company in the event of an unforeseen circumstance or loss. Without this insurance, your company has an increased risk of collapse should the unexpected happen.

Several insurance companies make it easy for businesses by instituting monthly or yearly payment plans. It may be more convenient to make monthly installments rather than yearly payments requiring a lump sum.

Every state and country has a different list of insurance that is required per business type, such as property or professional liability insurance. Depending on the type of business you operate, it may be in your best interest to add data breach insurance. Your tax accountant can best advise you.

3. Business Vehicle Expenditures

Depending on the industry, owning a vehicle, or a fleet, is necessary. In turn, you will need to track how much you spend on vehicles used for company purposes:

• Regular servicing
• Fuel purchases
• Licensing and registrations

Everything required to keep your vehicles in good condition.

At some point, it may be wise to subscribe to packages like Coast fleet and fuel cards to track those expenses. You will want an easy way of accounting for details that provide significant information on the costs of running the company vehicles.

4. Most Common Business Expenses: Utilities And Rent

The average utility cost is $2.10 per square foot for commercial buildings. That could include:

• Electricity
• Telephone
• Internet
• Water
• Gas

By December 2019, commercial buildings' utility costs averaged $647 per month. The national average dropped to $520 in 2020 when the pandemic hit the hardest. However, by the second quarter of 2021, things picked up slightly when the average became $632.

In 2022, experts believe, the national average for a small business will rise to $750 per month. There are slight differences depending on your state.

These payments are necessary as they keep you in business. Tracking your business's utilities allows you to identify waste and excess. Utilities are expensive, and until you identify the areas that make you pay more every month, it could mean continuing to spend more than you should.

5. Corporate Lunches And Business Travel Might Be Optional Business Expenses

These expenses will depend on the type of business you operate.

In some companies business travels and lunches are necessary activities that help secure partnerships and contracts. It then becomes an additional expense category that strongly affects operating costs.

What you want to do is to review the frequency of these activities. You might find it possible to avoid some costs and further streamline your company's style of attracting partnerships.

It is advisable to take this seriously, and regularly review the expense logs. Some businesses have experienced senior employees abusing such benefits. Enforce a travel policy for business travel so there is no confusion.

6. Compensation

Two years ago, the annual average compensation for a full-time employee was slightly above $87,000. Fast forward to 2022, and the labor market reports that compensation costs are the major element in business operating expenses.

Knowing how much your business pays in monthly compensation is a major determinant of whether some tasks should be outsourced:

• Accounting
• IT
• Some HR functions
• Social media marketing
• Janitorial services

All examples of workflows that can be outsourced to save money compared with hiring in-house personnel. In tough times, accurate monthly records will help determine whether to lay off workers or hire more depending on how business is going.