How to Keep Track of Business Expenses in 2024

A healthy financial strategy requires effective expense tracking, whether running a small business, launching a startup, or managing a larger organization. Consistent and precise tracking helps optimize your budget, maximize tax deductions, and increase compliance.

In this guide, we’ll explore how to keep track of business expenses, outline the best tools available, and share some practical tips to streamline the process.

Why Tracking Business Expenses Matters

Expense tracking is more than just bookkeeping; it’s a way to enhance financial control and empower smart decision-making. Here’s why it’s crucial:

• Improves Financial Planning: Knowing where money is spent leads to more accurate budgeting and resource allocation.
• Maximizes Tax Deductions: Consistent tracking helps ensure all eligible deductions are recorded, potentially reducing taxable income.
• Enhances Compliance and Trust: Organized records help meet regulatory standards, reduce the risk of penalties, and foster transparency within the organization.
• Detects Fraud and Errors: Regular expense monitoring helps spot fraudulent activity or errors so businesses can take timely corrective actions.

Methods for Tracking Business Expenses

Businesses have multiple options when it comes to tracking and managing expenses. Here’s a breakdown of methods and tools from basic to advanced:

Fully Manual: Spreadsheet Tracking

Pros:

• Flexible templates: Programs like Microsoft Excel and Google Sheets offer customizable templates for basic tracking needs.
• Familiar tools: Many people are already comfortable using these programs, requiring no extra learning curve.

Cons:

• Time-consuming data entry: Manual entry of every expense is labor-intensive and requires regular updating to keep records accurate.
• Prone to errors: Manual tracking increases the risk of small mistakes that can lead to larger financial discrepancies.
• Challenging to scale: As a business grows, spreadsheets become harder to maintain and don’t offer the seamless integration of automated tools.
• Limited visibility and control: Tracking real-time spending trends isn’t feasible without automated insights.

Basic Automation: Expense Tracking Apps

Pros:

• On-the-go convenience: Mobile apps allow employees to record expenses, scan receipts, and stay organized from anywhere.
• Error reduction: Automated features in many apps help reduce common errors associated with manual entry, improving accuracy and reducing discrepancies
• Time savings: Apps eliminate the need for manual data entry, saving employees hours each month. They also streamline receipt capture and categorization, speeding up the expense reporting process.

Cons:

• Lack of proactive policy control: Many mobile expense tracking apps lack robust policy enforcement features, meaning expenses that violate company policies may go unflagged until after submission.
• Lack of integration: These tools may not integrate with popular accounting software like QuickBooks, NetSuite, or Xero, so accounting and finance teams will still need to do reconciliation work at month-end.
• Limited reporting features: Most mobile apps offer only basic reporting, which can make it difficult to analyze spending trends, forecast budgets, or gain in-depth insights into expense patterns
• Potential security limitations: Not all apps meet high data security standards, making sensitive information vulnerable.

Full Automation and Control: Expense Management Software

Pros:

• Proactive Policy Control: Advanced expense management software can enforce spend policies in real-time, flagging out-of-policy expenses before they are submitted, which helps prevent overspending and simplifies approvals.
• Automated categorization: Expenses are instantly sorted into categories, simplifying budgeting and tax preparation.
• Digital receipt storage: Receipt scanning and storage help ensure documentation is always accessible and well-organized.
• Seamless integration: Integration with accounting software (like QuickBooks, Netsuite, or Xero) eliminates redundant data entry and enhances accuracy.
• Multicurrency support: Essential for international operations, enabling accurate, compliant tracking in multiple currencies.
• Time savings and reduced errors: By automating repetitive tasks, software minimizes errors and frees up teams for higher-value work.

Cons:

• Initial setup and learning curve: There may be a short learning curve, but the time saved in the long run outweighs this initial investment.
• Cost considerations: While the software provides significant long-term value, the upfront cost can be a factor, especially for smaller businesses with tight budgets.

Best Practices for Effective Expense Tracking

Keeping track of expenses effectively requires discipline and transparent processes. Here are some tips for staying organized:

Maintain Consistency

The key to successful expense tracking is consistency. Aim to record daily or weekly expenses rather than letting them pile up. Regular, incremental updates make the process manageable and prevent inaccuracies from forgotten expenses.

Separate Personal and Business Finances

A separate bank account or credit card for business transactions is essential to avoid confusion. This simple practice keeps your personal and business expenses distinct, which is crucial for accurate accounting and compliance.

Review and Analyze Regularly

Conduct monthly or quarterly reviews of your expense reports to identify trends, uncover errors, and make informed decisions about budget adjustments. This practice also helps detect potential fraud or non-compliance issues early.

Educate Employees on Policies

For larger teams, educating employees about your company’s expense policies is essential. Regular training sessions can help ensure everyone understands the rules around expenses, reimbursement, and the importance of accurate reporting.

Free Download: Corporate Expense Policy Template

Common Challenges in Expense Tracking

Despite the best tools and practices, expense tracking can present significant challenges:

• Missing receipts: Receipts can get lost or damaged, especially for remote or traveling employees. Using a mobile app with receipt capture capabilities can solve this issue.
• Tracking remote employees’ expenses: Monitoring expenses for remote teams or employees in the field can be challenging. Cloud-based apps can help provide instant updates and visibility.
• Mixed-use expenses: Clear guidelines and expense policies that are part personal and part business help manage them effectively.

Read more: 10 Best Practices for Business Expense Management

Knowing how to track business expenses is crucial for any company’s financial health. Businesses can streamline expense tracking and enhance compliance by selecting the right tools, adhering to best practices, and educating employees. A well-organized expense tracking process improves budgeting, boosts efficiency, and helps maintain audit-ready financial records.

Navan’s expense management platform streamlines the entire tracking process, offering companies tools for automated categorization, real-time reporting, and compliance, all in one easy-to-use app.

Whether you’re a small business or a larger organization, Navan can help you manage expenses like a pro. Discover streamlined expense management.