I still have many memories almost two decades ago when I started the business and opened our first company bank account in Makati. I was 20, and the branch manager interviewed me. He gave me a passbook and a checkbook.
I was nervous the first time I wrote a check. Moreover, if I remember it right, I used a spreadsheet to record the checks I prepared. A few weeks later, I tried PeachTree and Quickbooks without any guidance and studied them by myself by trial and error without carefully assessing our needs. It took me a while, but I got there.
What I wanted to share with you today is the best practice to manage expenses efficiently so we can avoid the mistakes I did in the past when starting a business.
Here it is:
1. The first thing that you would need to do is to identify the expenses that want to track. Below is a sample expense chart that you may use:
* Office Supplies
2. Setup your bank accounts. You will need to have a separate ledger/record of expenses per bank account. If you are using a spreadsheet, you may want to set up bank accounts as sheets. One sheet per bank account. If you are using accounting software, find the menu/function to set up bank accounts.
3. Issue a check as much as possible when buying something. Avoid cash transactions. Attached in the check is the check voucher to document the purpose of the check. If manual, make sure to record the date, payee, amount, expense account every time you cut a check and log it in your spreadsheet depending on the bank used. In the accounting software, most have a facility to encode the check or even print them together with the check vouchers.
4. Prepare the expense report summary. In Excel, create another tab and using formula, you may automatically summarize all expenses per expense account for the month. In an accounting software, expense report summary is available to generate real-time.
5. After a month’s expense report, you will somehow have a summary of your expenses and compare it with your current month’s transactions as a basis for you to control and manage expenses efficiently.
The more months that you can compare with then the more intelligent your report will be. Also, the smarter your report, then the more savings and profit you can realize you as you cut unnecessary expenses along the way.