Start tracking your daily expenses with this expense report template to enjoy an array of benefits. Here are some of the top benefits you can enjoy in both your personal and professional lives.
Let’s begin this post with stories of two friends, emphasizing what happens when people don’t track expenses.
Meet Dinesh. He is 28 years old and works as a consultant in a large company. Like most people in his age group, he too spends his money lavishly on everything during the first two weeks of the month and then struggles to get by for the rest of the month.
Expense tracking is something he does not do. He does not know where exactly his money is going. His friend Naresh, an entrepreneur, on the other hand, is also facing the same issue with his small business.
He has no clear understanding of where the business’s money is being spent. Since he owns a small business, he assumed that expense tracking would not be necessary, and now he is struggling to pay his employees.
The above two cases illustrate how vital expense tracking is. The remainder of this article discusses the importance of expense tracking for both individuals and businesses and how to track expenses using a simple expense report template.
Importance of Expense Tracking for Individuals
Maintain Financial Control
The feeling one gets when they think they are not in control of their finances is not a pleasant one. This can be avoided by carefully tracking every single financial transaction.
This way, people can know exactly how much money they are spending, where they are spending it, how much money is left in the bank, and how much of that money they can spend.
Accountability is an essential factor when people strive towards a financial goal like getting out of debt, building wealth, saving, or investing. One of the best ways using which people can hold themselves accountable is to track their expenses regularly.
This could be as simple as making all payments using digital means and pulling up statements for all of them.
Track Financial Progress
Expense tracking not only makes people accountable but also makes it possible for them to monitor their progress towards their financial goals.
For example, David has a goal to save Rs.1,00,000 at the end of the year. When he tracks his expenses every day, he will know how near or far he is from his goal.
Also Read: How To Create an Effective SMB Budget
Reduces Impulse Spending
The more often people see their expense records, the more likely they will refrain from making any impulse purchases. This is because when someone tracks their expenses daily, their financial wellbeing becomes a priority.
So, before making an impulse decision, people will stop and think if it is really required.
Find ways to save money
If someone is regularly tracking their expenses, they can spot wasteful expenses they can eliminate. For example, someone might be paying for the Premium Netflix plan when in reality, they only need the Basic plan.
Importance of Expense Tracking for Businesses
At a business level, the following are the main benefits and importance of expense tracking for businesses –
Improves Cash Management
It has been cited multiple times that many businesses fail because of a lack of cash. Cash flow is essential, and businesses need to do everything possible to manage it the right way.
One way to do this is with daily expense tracking so that a detailed report can be generated at the end of a specific period. This report can then help businesses control costs, see where money is leaking, and build an overall financial awareness.
Quickly determine profitability
Profitability is calculated by subtracting expenses from revenues. Profitability is an important metric because it helps businesses keep running, attract investors, and also helps in getting financing from banks.
By regularly tracking expenses along with income, businesses can determine their profitability levels with ease.
Keep employees happy
If a business has employees, they probably send the receipt of travel, meals, and other expenses for reimbursement. Keeping a close eye on expenses lets the business reimburse employees on time.
This contributes to overall employee happiness because they won’t have to constantly follow up till they get paid.
Stay prepared for tax season
Tax filing is almost always a stressful time for businesses. Proper expense tracking saves business owners the pain of digging through multiple records at the last moment to determine what expenses are tax-deductible and what are not.
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How to track Expense using a Template
For small businesses in general, spreadsheet templates are a blessing as it saves a lot of money from being spent on expensive accounting software and also because they are easy to use.
The expense report template from Lio is one of the simplest and most effective templates available right now. Users can enter data right from the app and later export it as an Excel file or a PDF file. This template can even be used by individuals to track their expenses.
Here is a screenshot of the expense report template –
And here are the steps to follow while using this template –
Step 1: In the Date column, enter the date on which the transaction happened.
Step 2: Use the Item column to enter the items related to the transactions.
Step 3: Enter the value of the transaction in the Amount column.
Step 4: Choose the mode of payment used for the transaction from the Payment Mode dropdown. By default, there are two options – Online and Cash. To add another option or edit existing ones, choose Add/Edit Value.
Step 5: If invoices for a transaction are available, they can be uploaded in the Bill column as an image.
Step 6: The Notes column can be used to input any additional details related to a transaction.
The total of all expenses will be automatically calculated and shown at the bottom of the expense report template.
By now, I hope you have realized that expense tracking is the best way for businesses and individuals to keep a leash on their everyday spending. Both individuals and businesses have their own financial goals, and expense tracking is one small step in the right path to achieve those goals.
All they need to do to get started is to download Lio and begin using the expense report template discussed above.