Ways Small Businesses Can Leverage On Data Analytics for Expense Tracking

Mavis LohUncategorized

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Companies are discovering the benefits of using Data Analytics as they strive to keep their operations lean during this pandemic. And Data Analytics has made it a lot easier to maintain a decent profit margin as businesses try to keep their heads above water. Expense tracking has got to be one of the most important benefits of using big data as we see how this helped many cash-strapped businesses become more resilient during this horrifying recession.

Besides helping with cost control, a cutback in expenses can significantly increase business profits while keeping the cash flows in the greens. Additionally, you can utilise these insights to make informed business decisions. So here are some ways small businesses can leverage on Data Analytics to track their expenses.

Integrate Digital Tools

Without a doubt, manually recording all business transactions and filing expense receipts can be time-consuming. Not only does employees have to dig into piles of documents to find receipts and report the expense, this may eat into their productivity and efficiency. Fortunately, living in the 21st century, we are blessed with savvy digital tools and applications that business owners can track expenses by tapping fingers on the screen. It would automatically track and note down your expenses, eliminating all the paperwork.

Review & Categorise Business Expenses

Business expenses shouldn’t stop after you have paid your vendors, or reimbursed your employees. Instead, you should make an effort to review your business expenses and determine ways where you can cut back on costs. You can do so by bringing your employees into the discussion and hold them accountable for their expenses on behalf of the business. For example, if your employees are buying office supplies or making a business travel, ask for receipts or invoice before reimbursing them. As a result, you would only pay for actual expenses, ensuring transparency in the business.

Additionally, you should make it a point to calculate each expense as a percentage of your business’ total expenditure so that you can identify your cost drivers. For instance, if your office rent cost covers 60% of total expenses, it may be a good idea to consider shifting to somewhere with cheaper rent. Similarly, if tariffs or customs duties are eating a huge chunk of profits, find alternates. This may seem time-consuming but you’ll be surprised how much you can save in the long-run.

Forecasting Business Expenses

Now that you’ve got this month’s expenses covered, what about next month? Or the next quarter? This is where data analytics swoops in to help you out with forecasting your expenses. Apart from being able to pre-plan and allocate your budget, you can make use of these information to set key performance indicators (KPIs) for your sales teams.

Furthermore, big data gives an insight into the company’s performance and identifies costs that qualify for tax deductions. Business expenses such as advertising costs, commissions, office supplies, travel, and maintenance – can all fall under deductibles. Hence, you can deduct these expenses from total sales to reduce your taxable income, which will reduce the overall tax expense.