Manoj Arora once said, “Whenever expenses become greater than income, it is inevitable that liabilities will become greater than assets”. As a business owner, it can be tough to see money coming in but not feel free to spend it. Managing your business expenses can sometimes feel overwhelming, but with the right strategies, you can turn financial planning into a powerful tool for growth. In this post, we’ll explore six business expenses tips that successful business owners can use to stay on top of their expenses and become better financial planners.

1. Track your expenses: 

Tracking your business expenses means that you will know exactly where your money is going, and you can make informed decisions about where to invest your resources. Using business trackers or accounting software to monitor your expenses, you can determine which monthly budget methods are best for your business. 

Resources: 

Managing expenses can be a chore—these 5 apps for small business owners makes it a little easier

2. Have a registered business bank account: 

Opening a business bank account is essential for monitoring your income, credit card, and payments, as well as applying for grants and loans. It also helps you prepare for IRS audits. As Warren Buffett once said, “You don’t see a millionaire making money with just a savings account.” By having a registered business bank account, you can manage your finances more effectively and set your business up for success.

3. Separate personal and business expenses: 

“When you know the impact of little expenses, you will realise there is nothing little in this world”. – Manoj Arora

It is always advisable to differentiate your personal expenses from your business expenses, as this can be a significant factor in the success of your business. By being mindful of your expenses, such as gym membership, food, internet, fuel, and personal travel, you can avoid accumulating unnecessary expenses that could negatively impact your business. Robert Kiyosaki advises that you “pay yourself first” a certain percentage of your monthly revenue, and it is from this revenue that you pay for your personal expenses, which can help you maintain a healthy balance between personal and business expenses. 

4. Make a budget & try to stick to it:

Creating a budget for your business is an essential step towards financial planning. A budget allows you to estimate your income and expenses for a period and helps you allocate your resources in a way that aligns with your long-term and short-term goals. By sticking to your budget, you can keep track of your spending and spend wisely on areas that do not contribute to your business’s growth.

Understanding the different financial terms that are crucial for managing a business is super important. These terms include estimated revenue, fixed costs, variable costs, one-time expenses, cash flow, and profit. 

When creating your budget, it will really help if you grasp the various categories of expenses.

Various categories of expenses:

• Estimated Revenue: This is the income you expect to earn from your products or services, considering the cost of providing them.
• Fixed Costs: These are the regular expenses that stay the same, like rent, utilities, insurance, and employee salaries. It’s essential to set aside funds for these, whether monthly or yearly.
• Variable Costs: These expenses can fluctuate, such as the cost of raw materials, fuel, or utilities that change with usage. Plan for these by setting flexible budget ranges.
• One-Time Expenses: These are costs that don’t happen regularly but still need to be planned for, like office renovations, new equipment, or unexpected repairs.
• Cash flow is the money that moves in and out of your business. Analysing cash flow helps you plan for high and low seasons and ensures you have enough resources when needed.
• Profit: is what’s left after all expenses are deducted from revenue. It is also a key indicator of your business’s health and growth potential.

Other Resources: 

• How to Create a Business Budget: 6 Simple Steps – NerdWallet
• GOOD AND BAD DEBTS AND HOW TO QUICKLY COME OUT OF A BAD DEBT
• Assets and Liabilities: Understanding Their Nature, Types, and Distinction

5. Know Which Expense to Deduct: 

Understanding which expenses are tax-deductible can save your business money. Common deductible expenses include salaries and employee benefits, office supplies, advertising costs, rent or mortgage payments, business insurance, and travel expenses. Knowing what you can deduct helps you avoid paying more taxes than necessary, and keeps more money in your business.

Here are the most common deductible expenses: 

• Salaries and employee benefits 
• Office expenses and supplies 
• Advertising and marketing costs 
• Rent or mortgage 
• Business Insurance 
• Taxes 
• Depreciation 
• Utilities 
• Travel expenses (most travel costs are deductible for business trips) 
• Loan interest payments 
• Repairs and maintenance 
• Professional subscriptions

6. Live the Reality of your Business: 

As a business owner, it is important to live within your means and avoid making bad financial decisions. Don’t follow the “Fake it till you make it” slogan. Instead, live a life that you can afford, focus on prioritising your expenses, and review your business regularly. By doing so, you can ensure that you are making sound financial decisions that will benefit you and your business in the long run.

Bonus 

Keep Records: 

It’s always a good idea to keep daily accounts and record-keeping of your business activities in addition to your regular budgeting. This way, you can gain a better understanding of your business’s ins and outs, make informed decisions, and determine if you need to hire more staff, purchase new equipment, or identify office needs.

Do you have any other tips to add to this list? We’d love to hear them, so feel free to share them in the comments section. Let’s learn together!