Here is a fun fact, every year small businesses and freelancers end up losing thousands of dollars because they overpaid their taxes. Wondering how? It’s because they lack the proper paper trail required to claim a write-off when filling out the 1099 form.
For example, if you use your personal vehicle for business activities you are entitled to a tax deduction of 57.5 cents for every business mile driven.
However, this will be hard to claim unless you are properly tracking your mileage and can distinguish between miles covered doing personal activities and miles incurred on business trips.
Here is another fun fact, every year the Internal Revenue Service (IRS) imposes millions of dollars in penalties on small businesses and independent contractors. The main reason for this is the failure to file taxes or pay payroll taxes.
Wondering why a business would fail to file their taxes? Lack of all the relevant documents, especially financial records, required to complete the process.
And now to the million-dollar/thousand-dollar question. How do you ensure you have all the required documents to not only file your tax on time but also increase your business revenue by claiming write-offs?
The answer is to use a business expense tracker app for your small business.
Note: If you want to use a top rated expense tracker for small business owners, try Bonsai Tax. Our application could scan your bank/credit card statements to discover potential tax write-offs and maximize your tax savings. Our users typically save $5,600 from their tax bill. Try a 7-day free trial today.
What is an Expense tracker?
An expense tracker is a dedicated software that integrates with your business credit cards and bank account to track every financial transaction that you make. This includes money received, money spent, and the purpose of the transaction.
Any busy business or independent contractor makes hundreds of transactions every month and keeping up with them manually is a time-consuming process not to mention error-prone. The last thing anybody wants after a long day of trying to win clients and close new deals is to sit down and track expenses. Transport, meals, drinks, accommodation, just to name a few.
With a business expense tracker app, you only have to take a picture of the receipt and the app will automatically log it as an expense. Also, business expense tracker apps can scan your bank/credit card records to discover tax receipts. The best part is you don’t have to worry about misplacing the receipt.
3 Reasons Why You Need A Business Expense Tracker App
Easily meet tax requirements - Expense tracker apps ensures that you have all the necessary documents to calculate your tax amount without overpaying or underpaying.
Easy financial planning - An expense tracker will help pinpoint how your business income is being used up. Consequently, you can take action to minimize the expenses and increase your revenue. Also, by being aware of your business spending, you can estimate quarterly taxes so that they never catch you unprepared.
Easy paper trail in case of an audit - If for some reason, your business needs to be audited, you will be ready with all the financial documents required.
Now, we have established that you need an expense tracking software to ensure the continued success of your business. But, with so many expense tracker apps in the market, how do you determine the best one for you.
Well, we will cover the factors to consider when choosing an expense tracker later in this post but, in a nutshell, it depends on your business needs. What are your main business expenses? If, for instance, you want to track car mileage you will find that some applications are better than others.
So, to make things easy for you we look at 6 top expense trackers for small business owners and the exact business need in which they excel.
The 6 Best Business Expense Tracker Apps On the Market
Let's break down the 6 best business expense trackers for professionals. First, we'll review the app we know best--our own.
Bonsai - Best for tracking professional business expenses
Bonsai tax is the best expense tracking software built exclusively to help professionals, small businesses and freelance contractors track expenses, maximize tax write-offs, and estimate quarterly taxes.
Once you’ve added your business credit card and bank account, Bonsai will automatically import your transactions and you can then categorize them either as income, or expenses.
It gets better. The app automatically identifies expenses that are deductible meaning you don’t have to be a financial expert to claim write-offs at tax time. Users generally save $5,600 with our software. If you need any extra guidance on the process of collecting, maintaining, and filing tax materials, Bonsai has a team of experts and written resources on their website to guide you.
For expenses paid for in cash, Bonsai comes with a receipt scanning feature so that you never have to input the transaction manually. The scanner is equipped with optical character recognition technology that reads the content on the scanned receipt ad inputs the data on your expense reports.
By analyzing all your business transactions, Bonsai can estimate your quarterly taxes so that tax time does not catch you unprepared.
Apart from expense tracking, Bonsai also includes a whole range of features that will be perfect for businesses and freelancers.
To begin with, it comes with customizable invoice templates that are sent automatically to your client after the delivery of a product or service. The invoicing system also supports automatic reminders if payments are not done on time and the option to add late fees.
The expense tracker also features a time tracking tool, proposal templates, and professional contracts that will especially be useful if you are a freelancer in the creative space.
The time tracker tracks the time you spend on a project while the contract templates help you establish a legally binding agreement with your clients even with no legal experience. The proposal templates, on the other hand, simplify what is usually an intricate process of winning clients over.
Bonsai tax gives you a 7-day trial but just like most expense tracker apps, it requires that you provide your credit card details first.
Additionally, you get a money-back guarantee allowing you to request a refund within 30 days if the software does not meet your expectations.
Expensify is another popular expense tracker and for good reason. The app can track all your business expenses by pulling data from your credit card, bank account, and tax receipts.
It then becomes very easy to go through these transactions and identify which of them require reimbursement. However, that’s not what makes Expensify the best expense tracker to reimburse employees.
It’s the fact that you can approve reimbursements directly from the app and also have the funds transferred from your account to your employee’s account. Of course, it’s necessary to first add your employee’s bank account to the app to make this possible.
Also, the fact that the Expensify receipt scanner comes with optical character recognition, means it can check expenses that you have categorized as reimbursements and compare them against the uploaded receipts to ensure there is no discrepancy.
The approval workflow is another welcome feature that lets you set up one person to approve reimbursements or have multiple levels of approval depending on your business policy.
This is facilitated by the policy compliance features that let you dictate the requirements for reimbursement to be approved. For instance, you can say that an expense exceeding a certain amount needs a receipt or some other additional details before it can be approved.
Expensify supports integration with several other apps including Uber, Quickbooks, and Zenefits for more streamlined business accounting.
The expense tracker comes with a six-week free trial.
Everlance is a popular business expense management app that will especially be useful for tracking mileage covered.
The app works in the background and uses GPS to determine the number of miles covered. At the end of every trip, you can categorize the ride as either personal by swiping left or business by swiping right.
Although there is the option to add trips manually, Everlance comes with intelligent drive technology that will automatically detect when you are moving and begin tracking you.
The other awesome thing is the app doesn’t just track the miles in numbers. It will use the current IRS mileage rates to calculate how much is deductible from your tax. Every 1000 miles you drive are worth up to $545 in tax deductions.
Everlance supports integration with your bank account and credit card for easy tracking of your expenses. It also allows you to take photos of your receipt and categorize them appropriately. Unfortunately, it cannot transfer the details of the receipt to your expense report. You will have to do that manually.
For more comprehensive accounting, Everlance supports integration with Freshbooks, another business expense tracker, that we will discuss below.
Quickbooks - Best multipurpose
Quickbooks is more than just an expense tracker, it’s a complete accounting software for small businesses.
So on top of tracking your business spending, you get additional services such as a live bookkeeper to bring your financials up to date for tax season.
It also comes with an invoicing system that lets you create instantly payable invoices. You can choose to be paid through credit cards, debit cards, online payment, or the ACH bank transfer system.
You can also use Quickbooks to pay your employees. Just add your employee details and when it’s due date Quickbooks will automatically disburse their salaries. And thanks to its integrated time-tracking the tool can also be used to automatically pay for hourly projects.
And it doesn’t end there. The expense tracker automatically calculates, files, and pays your payroll tax to avoid any penalty.
In terms of tracking expenses, Quickbooks integrates with your bank account and credit cards and automatically categorizes your transactions as income or expenses.
For expenses paid in cash, Quickbooks requires that you take a snap of the receipt and forward it through your email. They will categorize it for you and store it for use during tax season.
If you or your employees are always on the road and you are looking for an efficient way to track travel expenses, SAP Concur will be a great tool for you.
The expense tracker comes with the option to book flights, hotels, and cabs directly from the app allowing you to benefit from corporate negotiated prices. The great thing about this feature is it transfers the hassle of travel planning from you to the employee.
Your job will be to enforce policy guidelines for employees to follow when booking transport and accommodation services. You don’t want a scenario where an employee flies first class because no limitations were imposed on them.
The ability to book these services directly from the app also greatly simplifies the expense tracking process because no third-party receipts are required.
But even in the event that employees use a different booking platform, Concur still stands as a great tool to track these expenses.
Just like you would expect of any good expense tracker, Concur integrates with your credit card and bank account and also features a receipt scanner for complete expense tracking.
The scanner not only captures the receipt but also turns it into an expense report so that you don’t have to do it manually with a worksheet.
What if you want an app that you can log into to check your business expenses but you want nothing to do with the process of expense tracking? Bench is the tool for you.
The company assigns you a bookkeeper who is charged with the responsibility of importing, reviewing, and categorizing your expenses every month. If you need help with any issue then the assigned expert is just a phone call or a quick message away.
On top of tracking expenses, bench sends you financial reports every month to give you an overview of your business finances and help you track cash flow.
When it’s tax season, Bench will communicate with your accountant or tax software and give him/her all relevant info necessary to file your taxes.
Don’t worry if you don’t have an accountant. Bench will connect you with a tax expert to complete the process for you.
What to look for in an expense tracking app
How does the software work - What are its main features? Which expenses does it track and are they in alignment with your business spending habits?
Average monthly expense for your business - Some expense tracking apps have a cap on the maximum business spending you can track with them.
Compatibility with your accounting software - No tool is self-sufficient. Therefore, the best expense tracker app is one that integrates with other accounting and business software to ensure complete monitoring and management of your finances.
User access - Does the tracking software allow multiple people to update their expenses or only one person can log in.
Compliance - Business expense tracker apps should comply with existing regulations in the finance industry. One of them is the Sarbanes-Oxley Act (SOX) which protects investors from fraudulent accounting activities by businesses.
Ease of use - A great expense tracker should be built such that even people with basic financial knowledge can use it without requiring assistance.
Compatibility with all devices - The best expense tracker apps allow users to track business expenses from all the popular platforms including Windows, Mac, Android, and iOS. It should come with a web interface for computer use and a dedicated app for your mobile device.
Analytics - A great expense tracker should organize your expenses in such a way that they can be easily analyzed and help you come up with useful insights for your business. Like which areas to cut in order to increase revenue.
At this point, there is no disputing the importance of an expense tracker for your business expense. So what are you waiting for? If you are still unsure no need to fuss about it.
Start with our first recommended tool. Give it a try and if it doesn’t make your life easier, move on to the next solution. All the tools come with a 7-day free trial so you have nothing to lose by giving them a try.
But the one thing that’s for sure is you are better off using any of the tools recommended in this article than not using one at all.
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