Your unrecorded expenses are a profit fire hazard. Do any of these statements sound familiar?
- “It’s only $5. It’s not worth my time.”
- “I’ll do my expenses when I’m not busy.”
- “There’s no easy way to track my expenses.”
- “I have money in the bank, so I don’t need to worry about expenses.”
If so, your unrecorded expenses are in danger of becoming a profit fire hazard. Why carelessly burn up all your hard work?
In a few hundred words I’ll debunk the myths above and show you easy, practical ways to get your business expense proofed. Why is this such a crucial issue? Consider the following:
Every dollar of expense you fail to track is costing you at least $1.35! In today’s economy, heck in any economy, if you someone offered you an instant, no-risk return of 35% would you say no? Of course not! So keep reading and find out how you can earn it starting today.
Expense Tracking Myth #1: Its only $5. It’s not worth my time. How about an extra $351? Is that worth your time?
If you fail to record a $5 expense every week for a year, that is $260 ($5 *52 Weeks). Since you actually lose $1.35 for every dollar, the real cost is $351 ($260 * 1.35).
Spend a few minutes and think about how many receipts, or “small expenses” you’ve lost, forgotten or just threw out in the past few weeks. I bet it’s more than $5 a week! That money is coming right out of your pocket.
Expense Tracking Myth #2: I’ll do my expenses when I’m not busy. Show me an entrepreneur that isn’t busy, and I’ll show you an entrepreneur that isn’t successful. Cut out even 15 minutes of Social Media a week and you can get this done.
Expense Myth #3: There’s no easy way to track my expenses. I’ll let you in on a little secret. I positively hate doing expenses. Yes The Numbers Whispererâ„¢ and lover of all things finance hates tracking expenses. Good news, there are easy, low cost solutions.
My personal favorite is Shoeboxed.com, which lets you submit your receipt by forwarding emails (so easy), uploading scanned receipts, using their smartphone app or even mailing in hardcopies and they fill in all the details. It’s expense tracking heaven! Prices start at free (yes, I said free).
Other options include Keebo.com (UK version of Shoeboxed.com) and Expensify.com. If you are truly buried under an avalanche of receipts consider a bookkeeper to get you caught up, their fees are very budget conscious compared with a CPA.
Expense Myth #4: I have money in the bank, so I don’t need to worry about expenses.
Why you lose at least $1.35 for each dollar of expense you fail to track
When you perform work for a client, or produce a product for a customer you incur certain expenses. Let’s say you have to buy a Super Widget, and it costs $10. Aren’t you going to include that cost in the price you charge your client?
If you don’t (and why wouldn’t you?), you are spending money that should go into your personal bank account for a client’s expense. If you don’t record the expense you can’t ensure you bill the client for it.
Consider this. When you worked for someone else, and had to buy something for your employer with your own money or credit, did you get reimbursed? Of course you did! So why aren’t doing the same thing with your business? If you don’t treat your business as a business you will forever be held back from reaching your profit goals.
Where does the other $0.35 come from? Quite simply, the tax man.
From the government’s point of view, since you didn’t record that dollar of expense, it must be a dollar of income. That means it is taxable! A US business owner is considered self-employed, therefore he or she must pay 12.4% FICA and 2.8% Medicare on their income. Right there you’ve got 15.3 cents you’re out.
What about the other 20 cents? The average working American easily pays more than a 20% tax rate on their earned income between state and federal taxes. In many other countries the rates are even higher. At a minimum you are out $1.35 total, it could be much higher depending on your tax bracket.
Give yourself a 35% return today. Track all of your expenses.
Nicole Fende is The Numbers Whispererâ„¢ and President of Small Business Finance Forum. As a credentialed actuary with experience as a Chief Financial Officer, Investment Banker, and successful entrepreneur, Fende helps her clients reach their profit goals and learn how to effectively and enjoyably run the financial side of their business. In her book, How to be a Finance Rock Star, Nicole shares the same strategies she uses for her profit coaching clients to help them reach multi-platinum profits. You can order her book on Amazon.com.
Leave a Reply