You look at your business bank account and it has much less money than you thought it did.
What happened? Where did your money go? Well, it may be time to start auditing your business expenses.
I see this happen all of the time. So many business owners will log into their business bank account and see that they have money and they can afford this new course that just came out.
But do you really use all of those purchases that you made in your business?
How many of them are just sitting there either on your hard drive or in cyberspace somewhere, never even touched?
Spending money and not knowing where it goes isn't just something that small business owners do. I see it in all different size businesses - large, medium and small.
You know that a client just paid and you have money. Or you check your bank account and see money in there.
So you know you have the funds to buy that course right now.
But do you really have the funds to buy that course right now? What about all of your other business expenses that you have pay as well? Do you know that you have enough money to pay them this month too?
This is where auditing your business expenses comes into play.
An expense audit can be done easily if you use an accounting program like quickbooks or freshbooks or something else similar.
But if you don't have your bookkeeping done on a regular basis (which you need to change by the way!), then you are going to have to do it right now.
To do this right now, print out all of your business bank and credit card statements for this year. Preferably using a spreadsheet, you are going to plug in your expenses for each category. You can use this spreadsheet that is all set up for you or create your own.
Plus by doing this right now, you are going to get a headstart on your bookkeeping for this year instead of waiting until January of next year and having to do all 12 months before you give your spreadsheet to your accountant so you can file your taxes.
If you use an accounting program, run an income statement for the current year. Print out the whole income statement so you can look at it. Then staying in the program, you are going to click on each expense account and see where your money was going.
Steps in Auditing Your Business Expenses
1. Do the work above to see where your money is going.
You are going to want to look at the most recent year. For example, we are currently in the month of May, so you want to look at January through May. If we are currently in September, you want to look at January through September.
You need to actually sit down and look at the categories of your spending. You need to see the amounts of your spending. You need to see WHO you are sending your money too.
2. After looking at who you are sending money too and how much you are sending to them, do some analysis.
Did you actually use everything you bought?
Is it just sitting on your hard drive or in cyberspace somewhere, untouched?
How many of this same program/course/service have you purchased in the past?
How has this program/course/service actually helped you and your business?
Did you just buy because of FOMO and the sales page/business owner saying they don't know when they will offer this program again?
Did you buy tools and tech that had a lifetime deal that sounded good, but you haven't used once?
How much did you pay your assistants/contractors to help you this month? Did you actually utilize their assistance?
3. After doing your analysis, where did you spend money that you really didn't need to?
This is not so that you can regret your purchases. This is so that going forward, you can be more mindful of actually spending your money.
Buying something because of a possible discount, or the business owner saying they don't know when they are going to offer it again, isn't a good reason to buy something.
You need to have a real need for this program/course/service in your business. Just because you think you MAY use it in the future, doesn't justify buying it right now. You need to be able to use it right now.
4. How does money make you feel?
Most of the time, at least in my experience, people spend their money simply because they have it; something is on a special deal and they don't think they can get a better deal whether they need that something or not; or to make themselves feel better. This is especially true for business owners.
For the reasons that people spend their money, the first two are self-explanatory. But for the third one, to make themselves feel better, let's talk about that a little bit more.
As a business owner, you may buy something to make yourself feel better about your last launch not going as well as you planned. Or maybe you had 3 potential clients all tell you no this week. Or maybe something else in your business isn't working right.
So you make a purchase of a course or product that can give you something to make a change in your business. But you don't get to take advantage of the course or product OR it just doesn't actually help you in your business.
In the moment of the purchase, it was something that made you feel better about your business.
Spend some time digging into this question, how does money make you feel? Your answers may surprise you. Or they may not.
You should conduct regular audits of your business expenses so you actually know where you are spending your money. This is a job that no one else can do but you.
You can't hire someone else else to audit your business expenses for you. They can do the work to audit your business expenses, but their explanation of the results will make no sense to you if you don't know where your money is really going and what you are spending it on.
When are you going to be auditing your business expenses next? Are you going to set up quarterly dates to audit your business expenses regularly?