How to Track Business Expenses Alongside Your Invoices

Your business finances may seem easy to manage at first. You issue invoices, track your cash, and assume that whatever comes in is what you make. Meanwhile, your business expenses, such as subscriptions and tools, may be tracked separately or inconsistently.

This can cause issues for you in the future. If your income and expenses are in two different places, it becomes hard for you to see exactly how much you make in a month. By tracking your business expenses and your income, you can see exactly how much you make and how much you spend.

What Is Expense Tracking?

Expense Tracking is the process of recording, organizing, and monitoring all the money your business spends. This includes everything from large expenses such as equipment and software to smaller expenses such as transport, fees, and subscriptions.

The main aim of tracking expenses is to create a clear, accurate record of where your money goes and what it funds. Regularly tracking expenses helps you understand your costs, determine your real profit, and keep your records organized.

Why Expense Tracking and Invoicing Should Live Together

Maintaining separate systems for expenses and invoices can make it difficult to understand your business’s financial position. Having everything in one system gives you a clearer, more comprehensive view of your financial status.

1. You get to see your actual profit, not just revenue: While invoices help you track what you have earned, they do not help you track what you have spent. When expenses are tracked alongside invoices, it becomes easier to see what remains after spending.
2. Tax preparation is easier and less stressful: When everything is organized, there is no need to scramble at the end of the year. Everything is easily accessible and easy to sort and report.
3. Fewer errors and more time saved: Using two different tools for expenses and invoices can lead to confusion and errors. Using a single tool ensures less work and greater consistency.

Types of Business Expenses You Should Be Tracking

To have a clear picture of your finances, you need to track not only the obvious expenses. There are various types of business expenses, and even small ones can add up quickly if not accounted for. 

1. Software and Subscriptions: These include monthly or annual tools you use to run your business, such as design software, accounting platforms, cloud storage, and project management tools.
2. Travel and Transport: These include fuel, public transport, ride-hailing, flights, and accommodation for business-related trips.
3. Home Office Costs: These include a portion of your rent, electricity, internet, and other utilities if you work from home.
4. Equipment and Supplies: These include your laptops, phones, office furniture, and everyday supplies like stationery.
5. Professional Development: These include courses, certifications, workshops, and industry events that improve your skills.
6. Contractor Payments: Payments made to freelancers, consultants, or outsourced service providers.
7. Marketing Spend: These include advertising, website hosting, branding, and promotional tools used to attract clients.

Consistently tracking these expense categories will help you avoid missing any expenses.

How to Set Up a Simple Expense Tracking System 

An efficient system doesn’t require complex tools; it needs consistency and proper structure from the outset.

1. Open a dedicated business bank account. Keep your business and personal finances separate. This makes it easier to track transactions and avoid confusion later.
2. Create clear expense categories: Choose a few core categories (such as software, travel, and marketing) and use them consistently. This keeps your records organised and easy to review.
3. Record expenses as they occur: Always log purchases immediately after purchase, rather than waiting until the end of the week or month. This reduces the chances of missing or forgetting entries.
4. Use a tool that tracks income and expenses together: Find the right system for your business that allows you to manage invoices and expenses in one place. This gives you a complete view of your finances without switching between tools.
5. Set a regular review routine: Schedule time, it could be weekly or monthly, to review your income and expenses. This helps you stay on top of your finances and catch any errors early.

Expense Tracking Methods: From Spreadsheets to Software

There are various methods for tracking business expenses, and each method has its pros and cons depending on the business process.

1. Spreadsheets

Spreadsheets are a good option for freelancers and small businesses because they are free and customizable to business needs.

• When it works: Spreadsheets are well-suited for small businesses with fewer transactions and help them manage expenses and invoices.
• Where it breaks down: Spreadsheets are difficult to manage for larger businesses because they require manually entering all transactions, which can lead to errors and take significant time to match invoices to expenses and calculate profit.

2. Dedicated Accounting Software

Accounting software can help you track and categorize expenses. They can also provide tax-friendly reports.

• Pros: Less error-prone, provides a structured reporting system, and can connect to your bank accounts.
• Cons: Most accounting software handles invoicing and expenses separately. If you do both, it can be a hassle to export data and verify figures.

3. Combined Invoicing and Expense Software

Integrated invoicing and expense software, such as Billing, can provide a clear view of your finances. You can track your expenses in real time and link them to your income. This allows you to see your profit immediately.

• Why it helps: This eliminates the need to use separate tools for invoicing and expenses. There is less room for error, and it is quicker to review your finances or file your taxes.

When you consider these methods, a combined approach is the best option for freelancers and business owners.

How Billing Helps You Track Expenses Alongside Your Invoices

Invoices tell half the story. To truly understand your finances, you need your expenses in the same view, not buried somewhere else. Billing brings both worlds together. 

1. Log and Categorise on the Go: You can log your expenses directly as they happen, and you also get options for categorising expenses under categories such as software, travel, and marketing, among others. This helps you keep all your expenses in a single location, using receipts and notes.
2. Income and Expenses, Side by Side: Billing puts your expenses right next to your invoices, giving you an instant read on net profit and a clear view of which clients and projects are worth your time.
3. Reports That Write Themselves: No mental gymnastics required. Billing generates visual financial reports automatically, turning raw data into something you can read and act on.
4. Track by Client or Project: Tie expenses directly to specific clients or projects so you always know exactly what each one is costing you.
5. One Workflow, Zero Headaches: When invoicing and expense tracking live in the same place, your admin time shrinks, and your focus sharpens.

Sign up today and start tracking your invoices and expenses together in one place. 

Frequently Asked Questions

1. What is the easiest way to track business expenses?

The easiest way to manage business expenses is to use an application that integrates expense tracking and invoicing. This allows you to log expenses as you incur them and associate them with clients and projects when available. This keeps everything organized, minimizes errors, and lets you easily monitor your overall profit without spreadsheets or third-party applications.

2. Should I track expenses and invoices in the same tool?

Yes. Tracking expenses and invoices in the same application provides a clear picture of your finances, eliminates human errors, saves time, and helps you monitor real-time profit and generate accurate reports for tax and budgeting purposes.

3. How do I know which business expenses are tax-deductible?

You can know what business expenses are tax-deductible by checking the tax guidelines in your country. In most cases, tax-deductible expenses are ordinary and necessary business expenses. They include software, office supplies, travel, and services. Keeping records of your expenses as they occur can greatly help identify tax-deductible expenses.

4. Can I track expenses on my phone?

Yes. You can easily track expenses right from your phone. Our app, Billing, is available on both Android and iOS. You can also add receipts, organize expenses by category, and link them to specific clients or projects, making expense management simple and flexible on the go.

5. What happens if I don’t track my business expenses?

If you do not track your business expenses, you may end up losing money, underestimating your expenses, and overestimating your profits. It may also be difficult to prepare an accurate tax return, claim the correct deductions, and make the right financial decisions.

Final Thoughts

Tracking your business expenses and invoices is important to keep your business in order, understand your actual profitability, and maintain accurate records for tax purposes. It is important to avoid using multiple systems and trying to keep track of everything in your head, as this will only cause confusion and more work in the end.