People use an expense tracker to better manage their business and personal finances, analyse their spending patterns, and make informed financial decisions. The process includes monitoring and recording all the expenses incurred by an individual or their business and includes various subheads such as bills, utilities, supplies, salaries, vendor payments, entertainment, etc. The objective of using a business or personal expense tracker is to keep finances organised and create an effective budget that can be used to expand the business later on.

Common Types of Expenses

Here are the common types of expenses incurred by most businesses:

• Fixed expenses: These are regular expenses that are fixed and stay pretty much the same each month, such as loan repayments, rent, salaries for employees, etc.
• Variable expenses: These can vary and fluctuate monthly, such as utility bills or supplier/vendor payments, shipping costs, etc.
• Direct expenses: These can be directly attributed to a specific product or service, such as the cost of raw materials for production.
• Indirect expenses: These cannot be directly attributed to a specific product or service, such as office supplies or rent for a shared workspace.

It's important to use an expense tracker to monitor each of these types of expenses to get a complete picture of where your money is going and make informed decisions about budgeting and spending.

How To Track Your Expenses

While the process remains the same, there are two main ways to track your expenses: manually or using an automated expense tracker. Both methods have advantages and disadvantages, so choosing the one that suits your personal or business needs and preferences is essential. A combination of both manual and automated expense tracking is known to be the ideal combination.

• Manual expense tracking: A basic spreadsheet, calculator or pen and paper can be used to record all expenses manually. It is a low-cost option and can be done without any specialised software or tools. While it helps increase spending awareness and can be a good option for those who prefer a more hands-on approach, it is prone to manual errors and inaccuracies.
• Automated expense tracking: Online tools and apps can automatically track and categorise expenses, saving you time and effort while ensuring data accuracy. Automated expense tracking offers detailed insights into spending patterns, helping you to make informed real-time decisions about the budgeting and spending involved in your business. Integration of such tools with your banking account can increase efficiency and optimisation.

Benefits of Expense Tracking

Expense tracking offers several benefits for both individuals and businesses, including:

• Increased awareness & improved financial decision-making: Greater awareness of spending patterns and the ability to identify areas of overspending or opportunities to cost cuts.
• Better budgeting: Expense tracking provides a detailed overview of where money is being spent, making it easier to create and stick to a budget.
• Improved cash flow: The process can help identify areas where cash flow can be improved, such as reducing unnecessary expenses or improving payment terms.
• Better tax planning: Expense tracking helps you keep accurate records of expenses, making it easier to prepare and file taxes.

Do it With Fi

Ask.Fi by Fi Money is the simplest and most efficient expense tracker and financial assistant. Being an online tool, it is always available and helps you get insights into your spending across bank accounts & merchants. With all your expense-related information accessible at your fingertips, you can save time and manual efforts while focusing on your core business and how to propel it forward. 

Furthermore, Fi helps categorise your daily, weekly & monthly expenses to manage your money online easily — so you spend smarter. The data generated by the expense tracker will help you run a tight ship and maintain an optimal earning-to-spending ratio. 

Frequently Asked Questions

How often should you track your expenses?

The frequency at which you should track your expenses depends on your personal preference and the nature/complexity of your business. Typically, people track their expenses daily, weekly, monthly, quarterly, or annually. Companies with complex financial situations or irregular income may require more frequent expense tracking than those with more predictable and stable incomes.

What happens if you don't keep track of your expenses?

Overspending, missed business opportunities, lack of control, inability to achieve financial goals, and issues related to tax returns are some common pitfalls you can encounter if you don't keep track of your expenses.