As a carpenter, you will be working on various projects and designing different furniture or other things simultaneously. Dealing with all of these things at the same time means there is a probability you can't keep a proper record of your carpentry business expenses.
As a result, you will lose track of your carpentry business's expenses. Business expenses play a vital role as they can directly impact your profitability. It is the utmost objective of businesses to reduce their expenses to enjoy higher profits.
However, without knowing them, you won't be able to bring down your expenditure. All of this makes carpenters wonder how they can track their business expenses.
So, let's discuss the ways to track your business expense. But before that, you need to understand why it is important for a business to maintain record of its expenses.
Importance of Tracking Carpentry Business Expenses
If you want to achieve financial stability to grow your business, you need to manage your expenses. Bookkeeping and accounting is crucial element that determines whether your carpentry business is on the route towards success or going in the other direction.
All of these things tell you about your business's financial health. You can use it for cash flow management, helping you to find out the money you are spending on the expenditures. Tracking down your business expenses can help your carpentry business in many ways.
It allows you to enjoy numerous benefits, such as:
- Allows you to know about the money coming in and going out from the business
- Enables you to accomplish the financial goals that you set for your carpentry business
- Ensures that you don't go beyond the spending limit and end up taking debt that your business cannot pay
- Helps you in creating the financial statement with accurate figures
- Makes it easy to detect any fraud or any other suspicious activity that results in financial loss
- Makes it straightforward to organize the overall finances and statements
- Simplifies the overall process for preparing taxes
- With the accounting system to track expenses, you can ensure you are complying with the laws
- You can see the ratio of the amount of money you spend in comparison with the amount you are saving
To summarize, if you are tracking your expense, you will make well-informed decisions and enhance the profitability of your business. Let's go over the ways to manage your business expense efficiently.
Tips for Tracking your Business Expenses Efficiently
Expense tracking can prove to be a daunting task, particularly for carpenters, operating solely or having a small scale of business operation.
Big corporations can enjoy the services of accounting professionals and have complete departments set up for the management and tracking of their expenses.
Nevertheless, you don't have to worry about hiring a complete team of accountants or setting up a department for expense tracking. Below are some tips to help you achieve your goal.
Manage Your Receipts
Usually, the majority of the carpenters have receipts for the purchase or the business expenses that they incur. These receipts are subject to wear and tear and other possible damages. Therefore, you need to manage them with great care to have a complete record of your business expense.
The Internal Revenue Service mandates freelancers, small business owners, or self-employed individuals to maintain a record of the business expense for at least 36 months. Therefore, it is something that you need to abide by legally.
The two main reasons to keep paper receipts are:
- It will help you if you have to face a financial audit
- It gives you proof of expense that you can provide to your customers
Moreover, having an organized system will make it easy for you to track all the expenses, which you can go through to identify all the useless expenditures. You can store the receipts in a drawer or create a folder for them.
Keeping paper receipts in place can be a challenging and daunting task that can consume a lot of your time and energy. So, if you are tired of dealing with paper receipts, the next point solves the main problem.
Automate Your Expense Tracking
Keeping track of all the paper receipts is undoubtedly an energy-draining and tedious task. You will have to ensure the receipts are not subject to any damages or they don't get lost. These things can be difficult for a carpenter who is working solely.
Therefore, the only solution to this problem is automation. It will help you:
- Track your business expense
- Easy access to the document or receipts you need
- Manages your information in a better way
You don't need to be tech-savvy to find a way to manage your business expense using software or digital solutions. All you need is robust financial software that allows you to keep and store all the business receipts with the complete information and other records.
By doing so, you won't have to worry about keeping documentation and receipts for the past three years. You can access them in a few seconds. In addition, it will save you time when customers request receipts for their carpentry project since you can go to the software and find it instead of going through drawers.
The most imperative thing you should do is disturb and classify different business expenses accordingly. Classifying the business expenditure can save time and money since you won't have to go through files to search data. You can also identify all the costs useful for business and other futile.
You can categorize your carpentry business expense under the following categories:
- Daily expenses
- Non-business purposes
- Office supplies
- Personal drawings
- Travel expenses
If you want, you can further divide the expenses into more categories, making it easy to manage the entire business finances.
Using these tips can help you keep track of all the expenditures your business incurs. You can use it to your advantage by looking at the records to identify all the carpentry business expenses that are useless and putting a burden on your finances. Moreover, it will save you from any legal complications you can find yourself in if you go through an IRS audit.
Sign up to our newsletter