Have you ever noticed unnecessary expenses while reviewing monthly or yearly reports?
I bet you have. Maybe it’s just a few dollars. But what we don’t realize is that the pointless expense of $10 a day for a month makes it $300!
You can not win with your finances unless you put a leash on your spending. The first step for that is tracking your expenses.
It gives you an accurate idea about your spending patterns and helps to modify it. Let’s learn about some of the best ways to track expenses, shall we?
Key Takeaways
- Tracking expenses gives an idea about your unnecessary spending.
- Expense tracking software categorizes the expenses based on the transaction history.
- You can set a realistic budget for each category in your expense tracking app.
- Financfy simplifies expense tracking thanks to its comprehensive integration, advanced analytics, and other features.
- Tracking expenses can be pretty challenging if it is done manually.
- Effective expense-tracking apps should include features like automatic categorization, a user-friendly interface, and real-time alerts for expenditures.
10 Best Ways To Track Expenses
To manage your finances properly, first, you will have to know how you actually spend money. There are numerous ways and strategies to track expenses. Let’s take a deeper look at them.
1. Automate Expense Tracking
Who now has time to carry a notebook to write down his daily expenditures? In this era of digitalization, it is only natural to keep track of your expenses automatically with expense tracking software.
Integration With Bank Accounts And Credit Cards
Just a swipe, and you have made the purchase you wanted. Credit cards have made our life so easy, isn’t it?
However, we often swipe the card without even knowing how much money is left in our accounts! As a result, you may end up with an unexpected bill at the end of the month!
But hey! You can connect your bank account and credit cards to expense-tracking apps. These apps record every transaction and notify you from time to time.
Automatic Categorization
Linking your credit cards with an expense-tracking system has multiple benefits. Software like Financfy automatically categorizes your expenses into different segments, such as rent, food, bills, payrolls etc., based on your transaction details.
You can use it to determine which field you are spending more on and where you can cut the cost.
2. Use A Dedicated Expense Tracking App
The sole purpose of expense tracking apps is to notify users about their transactions, alert them when they are spending too much, and suggest ways to save some bucks where possible.
Mobile Accessibility
Expense-tracking apps are easily available on Google Play and the Apple App Store.
You can download the app, enter your information, and be done! Your phone will notify you about your spending, and you can also check your account status on the go.
User-Friendly Interface
When can we call an app the best? Only when it has a user-friendly interface. This means the app should be easy to access and navigate.
Dedicated expense tracking apps are designed to quicken transaction entry and keep the tracking smooth and hassle-free.
3. Set Spending Limits And Alerts
Setting transaction limits and alerts is one of the most amazing features of expense-tracking apps.
Users set a definite amount beyond which they don’t want to spend. If the decided amount nears, the app notifies the user, and he can take necessary measures.
Budget Setting
Expense-tracking apps categorize your transactions into multiple segments.
You can set a certain amount as the highest limit for each category. That’s called budget setting.
You can create as many categories as you want and set your budget for each category.
Real-Time Alerts
Now that you have set a budget for a category, whenever you approach the amount or try to exceed the budget limit, the app will immediately notify you.
4. Regularly Review And Reconcile Transactions
Any expense tracking app undergoes multiple tests and trials to confirm its accuracy level before it is launched in the market. However, it is always better for the user to review his transactions once in a while.
Periodic Reviews
It is not wise to leave expense tracking to the app solely. You should at least review your transactions weekly or monthly to ensure that all expenses are recorded properly.
Reconciliation
When you review the expenses, match them with your receipts, invoices, and bank statements to ensure total accuracy.
5. Categorize Expenses Accurately
There’s a 50-30-20 rule for any business to allocate their total profits. 50% of the margins should be used for the operational costs, 30% to cover growth and development initiatives and 20% should be reserved for emergency funds or reinvestment opportunities.
But every business has different spending habits. And expense tracking software allows them to create custom categories that suit their specific needs.
Custom Categories
Even though the app categorizes your business expenses, they do it in a generalized way.
You can always create customized categories that fit your habit. And you can also set how much you want to spend for that category.
Consistency
As we have mentioned, if you don’t set any custom category, the app creates a generalized one for you.
It identifies similar expenditures and puts them in one category consistently. However, you should check it regularly to ensure consistency in categorizing.
6. Leverage Reporting And Analytics
You will only know your business spending habits when you review and analyze the reports from your expense tracking software.
Detailed Reports
Daily tracking may not be enough to give you an idea of your expenditures on a larger scale.
To have a better and more accurate idea of your spending, generating monthly, quarterly, or annual detailed expense reports is wise.
Trend Analysis
Analyze the monthly report properly, find out your spending patterns and trends, and look for any area where you can cut some costs.
7. Keep Digital Receipts
Those days are gone when people used to keep paper receipts and calculate them one by one to know how much they had spent in a month. Now, people prefer digital receipts.
Receipt Scanning
Softwares like Financfy possess an amazing feature: scanning paper receipts and storing the digital version. That’s pretty convenient, isn’t it?
Cloud Storage
Now that you have digital copies of receipts and invoices, you can store them in the cloud for a lifetime.
Organizing and accessing those copies in the cloud storage is very easy, and you can do it anytime.
8. Use Tags And Notes For Transactions
Tags and notes are used to specify the transactions that usually occur from multiple categories.
For example, paying debts, payrolls, food costs, business trip costs, office supplies, marketing charges, training & development and many more. All these transactions fall under different categories.
However, you can use tags and notes to specify the cost of this event for more clarity and precision.
Tagging System
Let’s say you want to know how much you have spent on your business trip. It’s a hassle to open every category and find out how much you have spent on that budget.
Instead, you can put a tag like ‘Business Trips’ and sort the expenses under that tag. It’s easier to find out.
Notes
Notes are used to elaborate on the expenses. For example, if you have multiple payments or debts to clear, you can put notes and specify how much to give and to whom.
9. Monitor Cash Expenses
Though everyone nowadays prefers to pay online, there are still times when we make cash payments.
These are not recorded in the app, so it is necessary to manually monitor them and enter them in the software.
Manual Entry
If you don’t want to keep track of cash expenses on your own, make some time to enter those expenses manually in the app. That way, all your expenses will be stored in one place.
Cash Flow Monitoring
The main purpose of an expense tracking app is to keep your spending in check. Monitor your cash inflow and outflow from time to time so that you don’t spend more.
10. Leverage Financfy’s Advanced Features
Financfy is the best accounting software for tracking your business expenses with some advanced features that may be lacking in other apps or platforms.
Custom Reports
On your demand, Financfy generates customized reports on selected categories and gives you detailed supervision of the expenses.
Advanced Analytics
Financfy has advanced analytics to have a deeper insight into your transactions and spending patterns. You can study them better and look for ways to cut costs.
Importance Of Tracking Expenses For Individuals And Businesses
Whether it is an individual or a business, unless they know where their money is going, they won’t do well. The only way to know this is by tracking their expenses.
Financfy, one of the Best Cloud Accounting Software with multiple features, does this job very efficiently and with the most accuracy.
If you have a small business, Financfy can be the best choice for managing your accounts. Why take the headache of looking at numbers when you can do it with software?
Why Tracking Expenses Is Crucial
Tracking expenses gives you a better idea of your income and expenditures. It is essential to get a hold on these two properly for more profits.
Let’s take a detailed look at why tracking expenses is crucial-
Financial Awareness
- By tracking your daily expenses, you can properly know your spending habits.
- You can categorize the sectors according to your transactions.
- Identify your unnecessary and impulsive expenditure.
Common Challenges In Expense Tracking
Businesses often face many challenges that make it difficult for them to keep track of all expenditures.
- Manual Tracking pitfalls: Manual entry of expenses is time consuming and causes human errors, which affects the entire business. Also, different individuals recording expenses differently, results in inconsistencies.
- Fragmented Data Sources: When data are scattered over multiple systems, it becomes difficult to compile them accurately. This increases the chance of data being lost and inefficient report making.
- Lack of Real-Time Insights: The absence of real-time insights can result in reactive rather than proactive financial management. Also, it becomes challenging to grasp a clear and accurate picture of the company’s financial performances.
Features Of An Effective Expense Tracking System
Manual expense tracking is time-consuming, and the chances of errors are high. That’s why businesses are now looking for a reliable tracking system for their expense management.
There are some valuable features that a business should opt for while choosing an effective expense tracking system. Let’s take a look at them.
Automated Expense Recording
- The software should have swift integration between bank accounts, credit cards, and other methods of transactions.
- The system should be able to automatically categorize the expenses according to the transaction history.
User-Friendly Interface
- Users should be able to easily access and navigate the system without hassle.
- It should feature customizable categories for the users to differentiate their expenditures.
Real-Time Updates And Notifications
- The software system must notify the user about his real-time balance. It needs to be continuously updated.
- It should notify and alert the user when he is nearing his budget limit or overspends.
How Financfy Simplifies Expense Tracking
Financfy, with its easily customizable and advanced features has made expense tracking experience so smooth for users. If you are a small startup company struggling with your account book, let Financfy share the burden with you.
- Comprehensive Integration: Financfy can connect multiple financial institutions seamlessly and bring them under one platform.
- Advanced Analytics: Thanks to its advanced analytics, Financfy can provide real-time insights and trends about your spending.
- Mobile Accessibility: You can also access the software through a mobile app and track your expenses anytime, anywhere.
- Custom Reports: It prepares customized, detailed reports on any particular category for both individuals and businesses according to the demand.
Conclusion
With necessary features in an expense tracking software, you just need to follow the strategies discussed above to monitor expenses efficiently. And Financfy is your reliable partner here.
Financfy is the best online accounting software, and it also has a mobile app to work on the go. You can access it from anywhere, anytime, and check on your business expenditures. To see the differences, Sign up and enjoy a free trial now!