As a business owner, you've likely experienced this frustrating scenario: You start the month with what seems like sufficient capital. You buy inventory, pay suppliers, cover rent, handle transportation costs, and compensate staff. Before you know it, your accounts are nearly empty, yet you struggle to pinpoint exactly where all your money went.
This disappearing act isn't magic, it's what happens when businesses lack proper financial tracking systems. Money flows in and out without documentation, creating a confusing financial picture that makes it impossible to identify profit opportunities.
How To Track Your Expenses and Pinpoint Your Profit
Start with these fundamental steps:
1. Open a dedicated business account that remains completely separate from your personal finances.
This single step immediately improves your ability to track business transactions.When business and personal expenses mix, it becomes nearly impossible to determine your true business performance. A separate account creates a clear boundary that simplifies tracking and tax preparation.
Find out which costs are going up the most. Knowing this helps you make smart price adjustment choices without cutting corners on quality.
2. Develop the habit of collecting receipts for every business expense, no matter how small.
These physical records become invaluable when reviewing expenses later. For each transaction:
- Write the purpose on the receipt
- Store receipts in labeled folders or envelopes organized by month
- Take photos of receipts as backup using your phone
- Record the transaction in your tracking system the same day
For income, record every sale immediately, whether it's a cash transaction or electronic payment. Note the amount, date, and what was sold
3. Create a Simple Record-Keeping System
You can start with something as basic as a notebook divided into "Income" and "Expenses" sections. Each entry should include: Date, Description, Amount, Payment method and Category (for expenses)As your business grows, you might upgrade to spreadsheets or accounting software, but many successful businesses manage effectively with manual systems when properly maintained.
4. Categories All Your Business Expenses
To gain meaningful insights from your financial tracking, group your expenses into categories that make sense for your business. Common categories include:- Essential Expense Categories: Stock/Inventory which includes; Raw materials for production,Finished goods for resale, Packaging materials,Import duties and clearing fees (if applicable).
- Rent and Facilities: Shop/office rent, Security deposits, Caretaker fees, Service charges to landlord, Shop cleaning and maintenance.
- Government and Regulatory: Business registration fees, Annual returns filing fees, Tax payments (VAT, company tax, PAYE) Local government levies, Industry-specific permits or licenses Association dues
- Transportation: Fuel for business vehicles,Public transport for business errands,Vehicle maintenance and repairs, Driver salaries or payments, Vehicle insurance and registration
Categorizing expenses helps you understand spending patterns and identify areas where costs could be reduced. It also simplifies tax preparation since different expense types may have different tax implications.
5. Implement Regular Financial Review
To benefit from your tracking efforts, schedule regular financial reviews:
- Weekly Review: Take 15-30 minutes each week to ensure all transactions are recorded and categorized correctly. This prevents backlog and keeps your records current.
- Monthly Review: At the end of each month, calculate total income and expenses review category totals to spot trends, compare with previous months, Note any unusual spending and check if you're meeting profit Target.
- Quarterly Reviews: Every three months, conduct a deeper analysis. Review your profit by product or service Identify seasonal pattern, Adjust pricing if necessary Plan for upcoming expenses.
These regular reviews transform your financial data into actionable business intelligence that guides your decisions.
Why You Should Track your Business Expenses
- You Get to Understand Your Real Profit: It's easy to think you know your profit margin, but without careful tracking, those assumptions are often inaccurate. Solid financial records clearly show which of your products or services are the most profitable.
- Easy Access to Loan and Investment: When you seek loans or investment, financial institutions and investors need assurance that you manage your money responsibly. Clean, well-organized financial records demonstrate your business acumen and financial discipline. This makes it far more likely for you to secure the funding you need, often with more favorable terms.
- It Makes Tax Payment Easier: The Federal Inland Revenue Service (FIRS) and state tax offices need proper records. Good records help you follow tax rules, avoid penalties, and even find legal ways to reduce your tax. When you keep organized records, paying tax becomes less stressful and more helpful to your business.
Some Practical Tips to Track Your Expenses
Smart Cash Flow Management
To effectively manage your cash flow, keep a clear and separate record of the money your business owes to others (accounts payable) and the money others owe your business (accounts receivable). Establish clear and consistent payment terms with both your customers and suppliers.
Understanding Your Power Costs
Electricity expenses can be a significant overhead for businesses especially in Nigeria. To gain a true understanding of these costs, track your generator fuel consumption, repair expenses, and NEPA bills as distinct categories.
Digital Record-Keeping Tips
- Use WhatsApp to take photos of receipts and send them to yourself
- Create a special email address for financial documents
- Use your phone to record voice notes about expenses when you're too busy to write
- Take photos of financial calculations before erasing them
Managing Transactions in Multiple Currencies
If your business deals with both Naira and foreign currencies (like the US Dollar), it's better to track each currency separately. For every transaction involving a different currency, diligently record the exchange rate at the time of the transaction. This ensures you can accurately calculate your true profit, accounting for currency fluctuations.
Using Tela to Track Your Business Expenses.
You can use Tela to manage your expenses efficiently in a number of ways.
1. Organize Your Expenses Automatically:
As you record expenses in Tela, be it "Transportation," "Office Supplies," "Marketing," or even "Generator Fuel", you categorize them instantly. This gives you a clear breakdown of where your money is going, making it easy to spot potential savings.
2. Instant Visibility to Your Spending:
Instead of waiting for month-end to see your financial picture. Tela's intuitive dashboard provides an immediate summary of all your business expenses. Track your total monthly spending, identify top expense categories at a glance, and monitor progress against your set budgets.
3. Simplifies Expense Reporting for Your Team:
If your employees incur business expenses, Tela simplifies the entire process. They can use the Tela app to quickly record expenses and submit digital reports. You can then review and approve these submissions online, leading to faster and more transparent reimbursements for everyone.
4. AI insights to Grow Your Business:
Tela's AI goes beyond just recording data. It generates insightful reports that reveal trends in your spending over time. For example, you might discover a significant rise in transportation costs, prompting you to explore more efficient logistics. These insights help you make smarter business decisions, control costs, and ultimately improve your profit
5. Secure and Organized Records:
All your expense data is securely stored in the cloud with Tela. This makes it easy to access your financial records whenever you need them, whether for tax purposes or for tracking your business performance.
Conclusion
The difference between thriving and merely surviving often comes down to how well you understand your numbers. When you track what you spend, you begin to see what’s working, what’s draining your resources, and where your money actually goes. Tela acts as a reliable digital assistant making it easier to manage your spending, providing you the insights you need to keep your finances in check.