As a business owner, you are ultimately accountable for the finances of your company. In order to manage and improve your finances, it’s important that you keep track of expenses, especially as your company grows or changes.
Best Practices for Monitoring Expenses
The first step to being able to monitor your expenses is to have a basic bookkeeping process in place. You need to regularly monitor your accounts and keep track of them within an accounting software like QuickBooks. Once you have that data in QuickBooks, you can produce reports on a weekly or monthly basis to track expenses. Within those reports, you can compare expenses for the current time period versus the previous month or the previous year to see significant changes.
Analyzing the Income Statement
On a monthly basis, you should analyze the income statement for trends related to your expenses. Are there specific categories of expenses that have changed significantly in the last month or compared to the previous relevant accounting period? If so, it’s important to dig in to understand why those changes took place. You could create a budget for the month and then compare the actuals to that budget. This is a helpful way to predict expenses and to audit if those expenses are happening according to the plan. You can also make comparisons of vendor-specific expenses for current time periods versus prior time periods to see changes in expenses for specific vendors.
Finally, you can have a detailed expense review process with each team member or department within your company to justify each expense and this is something that could guide your budgeting process. The level of analysis of your income statement varies depending on the complexity and size of your business.
Get Expense Monitoring In Place
As your company grows, it’s important to have best practices for monitoring expenses. If you don’t currently have a strong process for monitoring expenses, contact Bernard today. He can help you get the basic foundation set up and then get a recurring process in place that is easy to manage.