Expense tracking is a crucial business task. Small businesses like yours use it to monitor operational costs. When done correctly, it makes for more efficient financial and human resource allocation.
However,tracking expenses can be challenging. All too often, we find business owners either delegating or abandoning it altogether. But their reluctance is traceable to the stressful nature of tracking expenses accurately.
Several problems arise while recording financial transactions. To ensure a hitch-free process, you need to know these problems and how to deal with them.
Problem: Errors from Entering Accounting Information Manually
It’s natural for businesses to incur basic operational costs. To record such cash expenditure, many companies resort to manual methods. While such processes work, they’ll expose you to errors, especially when small line items like petty cash expenses need to show up in the records.
Let’s say you’ve made several petty expenses within the week. However, you didn’t record them because you’re handling sales, marketing, production, and delivery. Eventually, you’ll record the transaction by looking through paper receipts and writing out the expense. This process is error-prone.
Imagine recording a €200 expenditure as €2,000 or €20. The records overstate or understate the actual amount spent and give you an incorrect view of your company’s cash flow. Let’s break down the implications:
1. Entering an incorrect value of €2,000 creates the impression that your business is more profitable than it is. With an initial bank balance of €10,000, you’ll expect to have €8,000. However, you’ll find that it’s €1,800 more, which you’ll consider to be part of your profit.
2. On the other hand, €20 leaves you with an assumed bank balance of €9,980 when it should be €9,800. Imagine making projections on the non-existent €180 “profit”.
Solution: Use Automated Systems
Human error is inevitable in accounting. Adopting automated systems is effective in eliminating potentially grievous mistakes. You can use modern accounting package software, which ensures all entries are correct. Even with paper receipts, some of these software offer scanning features that read receipt details using Optical Character Recognition (OCR) technology.
Though you can integrate expense management and account software, use a small number of applications and only few paper documents where possible.
Problem: Difficulty in Tracking Expenses
A business has to deal with several expenses, including transportation, minor repairs, and office stationery. Sometimes they’re hard to track as you spend on the go.Besides, if staff in different departments handle your expenditure, you might forget to record one or two payments they made.
Not paying attention to these seemingly negligible expenses can have adverse impact on your business as they can easily accumulate to a significant amount of money.
Solution: Use a Digital Filing System
Using digital tools to track physical expenses is an effective way to track your company’s physical expenses. Using an accounting management software makes it possible to spot missing financial information. You can also digitize receipts and automate your accounting process.
Besides, digitized receipts take away the stress of dealing with paperwork. Once you’ve saved your financial documents on your device and backed them up, you won’t need to deal with missing and fading receipts.
Accounting Software and Automated Systems
Problem: Incorporating Account Information between two or more software systems
If you’re already using manual and automated systems to file and record account information, you may be finding it difficult to manage and coordinate multiple systems efficiently. Each software often serve specific functions. Not knowing how each one pugs into another can lead to a time-consuming recording process.
You can use a spreadsheet to collect transaction details on the go. However, would you find it easy to pull that information into an accounting package with ease?
Solution: Minimize the Automated System as Much as Possible
Simplicity is the key to recording your organization’s finances. You can combat this problem by using a system that can perform more than one financial function. Multi-purpose accounting management software helps minimize the amount of software and paperwork you have to manage and deal with. Plus, modern tools are able to seamlessly plug into various other applications by automatically generating all the necessary data and integrating it across other systems.
Accurate and timely accounting is vital to maintain reliable financial records. It makes it easy to ascertain the true financial position of your business. However, this task is not as easy as it sounds. Most business spending happen on-the-fly, and automated systems are a better option to keep things seamless.
It’s crucial to note that automated systems should improve operational efficiency. It’s not always the case, though. Examples are filing incorrect transaction details and not using the appropriate accounting software tools. This situation can be frustrating.
ZayPay is an efficient expense management system that manages multiple functions effectively. This online transaction management system scans and files new receipts as they come in.
ZayPay’s data management function is efficient, as it flags any missing or insufficient transaction information for review. It also combines expense management and accounting in one system. So, with one software tool, you can have a constant up-to-date overview of all your finances and accounting information.