Your startup needs 2Cs — capital and cash flow — to run smoothly. Just like the human body burns energy to function, a startup uses capital and relies on cash flow to handle day-to-day operations and administrative tasks.
Keeping a close watch over your business expenses helps you understand how much money you spend, where it goes, and how often you spend it. But tracking expenses is no easy task.
With numerous daily transactions and a large amount of financial data to manage, tracking business expenses becomes tedious, time-consuming, and error-prone. Nearly 76% of workers spend up to three hours daily on non-core activities such as manual data entry, business expense tracking, and other routine administrative tasks.
That's a whopping 15 hours wasted per week, which employees could have better spent focusing on important business challenges that generate revenue and increase the company’s value.
Fortunately, the right tool can help you automate routine administrative tasks like tracking your spending. With the expense tracking software, you can get proper insight and control over your expenses, boost profits, and scale your business with little effort and no wasted time.
What Is Expense Tracking Software?
Expense tracking software (or expense management application) is a digital tool that records all your business expenditures, giving you a clear and detailed understanding of cash flow.
With it, you can track business and employee expenditures, streamline approvals, accelerate employee reimbursements, and create detailed expense reports.
Expense tracking software also provides the right tools to automate business expense management, helping the organization make informed decisions about future spending and reduce costs.
The Benefits Of Using Accounting Software To Track Business Expenses
As a small business owner or entrepreneur, you have probably used a spreadsheet to track your expenses.
While that's a good initial strategy, manually tracking expenses becomes challenging as your business grows, mainly when multiple payments occur across various departments.
This is where using software for expense tracking is quite handy. Here's how expense-tracking software can be beneficial for your business:
- Saves Time – Accounting software automates manual tasks, such as data entry, report, and receipt generation. This is a massive benefit for your business, as your employees don't have to spend their critical working time tracking business expenses.
- Improves Accuracy – Manually tracking expenses opens more room for human errors. Sometimes your employees might forget to record a necessary business expense, or two employees could track the same payment, billing it twice. Accounting software ensures that your expense tracking is error-free, helping you create more accurate financial reports.
- Reduces Costs – While there's an initial investment involved in purchasing and setting up accounting software, the long-term cost savings are significant. Instead of hiring a large team of accountants, you can automate and manage your finances cost-effectively.
- Enhances Financial Accounting – Accounting software provides real-time access to your financial statements like income, expenditures, purchases, cash flow, profit and loss, and balance sheet. It helps you monitor your expenses in real-time, make informed budgetary decisions, and identify areas for improvement.
- Improves Data Security – Modern accounting software provides advanced security features like individual login, strong passwords, and geo-fencing to protect sensitive financial data from unauthorized access or digital hacks.
- Syncs Expenses – It's common for businesses to have expenses across multiple platforms — credit cards, current bank accounts, loan expenses, invoices, payroll services, and more. Accounting software makes daily expense tracking across numerous platforms seamless, providing a unified view of all your expenses.
- Streamlines Tax Filing and Compliance – Having standardized and accurate records of your expenses makes it easier for your tax accountant to file tax returns and avail of tax credits. With accounting software, businesses can quickly generate compliance reports, reducing the risk of penalties due to accounting errors.
4 Must-Have Features In An Expense Tracking Software Solution
The features of expense tracking software vary by vendor. For example, while some systems offer just the basics to record money coming in and going out, others have advanced features and tools to automate expense management end-to-end.
Here is a list of four must-have features to look for in expense tracking software:
1. Unified Data In One Intuitive Dashboard
Look for software for expense tracking that tracks expenses from several sources like credit cards, payroll services, bank accounts, bill pay providers, and QuickBooks. Having an accurate unified view of your expenses makes it easy to understand where your money is going, helping you reduce unnecessary expenses and budget better.
2. Expense Reports That Update Daily
Take the guesswork out of how you're spending your money. Look for an expense tracking system that calculates your operating expenses daily, giving instant insights into your cash burn, expenditure types, and frequencies. This makes it easy to reduce business expenditures.
3. Seamless Accounting Integrations
Transform your bookkeeping with a sophisticated expense tracking system that automatically tracks and records fixed and variable expenses. But even more importantly, look for software that integrates with other accounting tools like QuickBooks so that you can transfer and receive data seamlessly across multiple platforms.
4. Automated Burn Rate, Runway, And Cash Zero Date Calculations
You need to know the following three metrics to understand your business's financial performance:
- Burn rate denotes the rate at which a company that is not yet generating profits burns through its cash reserves.
- Runway refers to how many months your business can keep operating before it runs out of money.
- Zero cash date is the predicted future date that the business will run out of money at your current spending rate.
These three metrics will help you budget, strategize, forecast, and fundraise your business. Look for an expense tracking system that automates these three critical calculations.
Top Expense Tracking Software
With a wide range of expense-tracking applications in the market, finding the right one that aligns with your company's policies may prove challenging. Fortunately, some expense management tools stand out from others in quality and offered features. The following are the five popular picks you can choose from:
Zeni is a powerful tool tailored to meet the challenging expense tracking and other financial requirements of startups. When you choose Zeni, you get access to a 100% accurate, AI-driven dashboard that provides real-time updates to all your financial data, including expenses.
Zeni's Employee Reimbursements Product allows you to quickly request, approve, and receive reimbursements. All from one dashboard. Same-day ACH for employees.And at no extra cost!
They offer a variety of pricing plans to match your business needs. Get started for as low as $549/month with a Full Service Plan for your startup. Keep in mind that once you sign up for a Zeni plan, the Employee Reimbursements Product is offered to you for free.
If you use other software in the Zoho ecosystem, you can opt for Zoho Expense. An online expense reporting software, Zoho Expense, automates and simplifies expense tracking, helping you get better control over business expenditures. It integrates automatically with Zoho Books, provides multi-currency expensing and accounting, and converts billable expenses into customer invoices.
Zoho Expense has a free plan for up to three users and paid plans that start from $3 per user/month.
Certify is a popular expense tracking system that provides deep data insights into your corporate spending. It helps you automatically create spending reports for each employee, making spending approvals and reimbursements effortless.
Certify integrates with popular accounting applications like QuickBooks, Sage, Netsuite, and Paycor. It has actionable dashboards to generate quick reports and quickly issues secure credit cards to employees. The paid plan starts at $12 per user/month.
If you're looking for a simple and speedy expense tracking system, Expensify is an excellent choice. The mobile-friendly app makes it easy to create error-free expense reports instantly. Furthermore, it has several advanced features that help you manage your expenses efficiently.
Expensify also has a built-in employee time tracker, one-click receipts scanning, and advanced tax tracking. Its free plan has limited features, and the paid plan starts at $5 per user/month.
Geared toward small businesses, ExpensePath makes expense reporting efficient for startup owners and entrepreneurs. The automated expense-tracking workflow helps you save time on routine administrative tasks so that you and your team can focus on core business activities.
ExpensePath has an easy-to-use interface and a handy mobile app. Its paid plans start at $5 per user/month.
Is Expense Tracking Software Really Necessary For Startups?
Expense management is critical for startups, especially in their early stages, where every penny counts.
As a new and fast-growing business, you've got to be mindful of your finances and keep tight control over your expenditures. Manual expense tracking is not only time-consuming but also prone to errors.
Besides tracking and categorizing costs, expense-tracking software offers many other benefits. It helps you comply with tax regulations and analyze spending patterns for better budgeting. You also get to increase financial transparency for stakeholders, which can be a huge benefit when raising external funds.
Helping Startups Keep Better Track Of Expenses
As a startup founder, you must closely monitor your business expenses. The right expense tracking software will give you the much-needed unified macro and micro view of your business expenditures. It will help you make better-informed decisions about your spending, budgeting, and planning.
While expense-tracking software shows where your money is going, you may want to get professional advice to help you better control and manage your expenditures. Sophisticated expense trackers with fractional CFO services are powerful in streamlining your finances and making strategic financial decisions. This can free up your time to focus on core business activities and take your startup to the next level.