Tracking the amount of money spent on the projects is important to invoice customers and determine the cost & profitability analysis when your company is providing services to another company. On the other hand, expense tracking or internal project is important for cost and ROI calculation. Understanding how this money is being utilized across the project is such a significant issue. The consequence for not properly tracking and reporting project expenses may lead to a budgetary issues.
When project or program managers track the expenses effectively, it is helpful not only to the existing projects, but also the ones to be undertaken in future for forecasting accurately. Actually, with each financial accomplishment come more opportunities to handle even bigger and more prominent projects. Common expenses that are synonymous with almost any typical project include:
- Travel costs
- Client entertainment
- Direct and indirect expenses
- Overheads
- Advertising
- Legal costs
- And various other costs.
Regardless of whether you are using spreadsheets or expense tracking software, there are key reasons why you need to keep tables on your project expenses on a continual basis.
Why track your project expenses
1. Financial awareness
As a project manager, are you aware how your project finances are being utilized? Is your project as financially healthy as you believe? Professionally tracking and reporting your expenses, even those daily expenses that you consider immaterial, warns you before you blow your budget.
Additionally, tracking your expenditures ensures you achieve your project financial targets. How is that? By clearly understanding your project spending using project budget limits, you can aptly make the necessary changes to complete your project within time and budget.
2. Effective expense tracking and reporting to avoid conflict
As a project manager or business owner, you can set clear policies for the expense types and reimbursement limits to avoid misunderstandings are about costs. Tracking the project expenses by asking team members to provide receipts is helpful to avoid conflict and maintain compliance also. An excellent reporting mechanism is extremely helpful to support the amount to be reimbursed to your team and also invoicing to your customer. It is even better when you can provide your clients in the expense receipt as an extension to the invoices. If your project is spread in multiple countries, tracking and reimbursing in multiple currencies becomes all the more important.
3. Helps anticipate the costs of similar projects
When you formally track and report expenses, you have a permanent documentation which helps you correctly anticipate expenses for similar projects in the future. This is even more significant when it comes to budget-making process.
4. Business expense tax deductions
By keeping track of project expenses, business owners are assured of getting tax deductions when the tax season approaches. Apparently, the more deductions businesses file, the lower their taxable income. The Internal Revenue System (IRS) and other tax authorities do not operate on a trust system. Project managers and business owners, therefore need proper documentation and evidence for all their deductions.
When managers do not keep proper records and an audit is done, the IRS can refute their deductions or even induce penalties and fines against their business. Obviously, it is not advisable to let that happen. Project managers can deduct project expenses as long as they are:
- Directly related to their venture or business
- Ordinary and necessary
- For a reasonable amount
You might be tracking your major expenses only; however, it’s crucial to keep tabs on every expense, small or big, so that you can benefit from the largest deduction possible. Here are some of the most-overlooked expenses during project management:
- Entertainment and meals – Bear in mind you can deduct some entertainment costs that relate to your business; however, the IRS limits the magnitude of these deductions.
- Travel and vehicle-related expenses – Besides your normal mileage deductions, your parking fees and tolls can also be considered for tax deductions, as long as they were incurred for business reasons.
- Startup expenses – It takes a lot of time and money to get a venture off the ground. Talk of rent, permits, market research and many other costs. Expense tracking may be a great way to keep your budgetary controls as you grow.
5. Project expense reimbursements
If your project team spends most of their time in the field, you may be required to provide expense reimbursements. There is always a time when the team members use money from their pockets, to support some business-related dealings. The best organizations have a way of tracking and handling these reimbursements.
This ideal practice guarantees that the expenses tracked are accurately and in a timely manner. From a company perspective, timely settlements of these expenses when tracked well will certainly boost your employees’ morale.
How automating expense tracking and reporting makes your life easier
Some managers and business owners still use traditional methods to track and report expenses. This is perhaps one the key reasons why some of them view the whole process as complicated and even inconvenient. Embracing modern time and expense tracking solutions like AccountSight is the way to go for every manager who wishes to expedite his/her project operations.
Tracking expenses via AccountSight’s online expense management software or mobile app or Excel upload has three key advantages of automating your expense tracking and reporting procedures:
- Accuracy
- Efficiency
- Security
Automation helps managers log and monitor project expenditures accurately, and in real time online. You will never again have to lose sleep about misplaced business invoices and receipts. This is taken care of since an expense tracking system stores expense logs in the cloud. Finally, automated tracking of expenses allows project managers to focus their time and energy on something else they are skilled at.
What to look for in an expense tracking software
Presently, there are various expense tracking and reporting tools in the market. However, it is good to go for a tool that fits the following criteria.
- Easy to use
- Easy reporting
- Works how you work
Ensure you pick a tool that is practical; and notably, the one you will enjoy using. For instance, AccountSight time and expense tracking software interface is really easy to use and robust enough to accommodate various expense scenarios such as multiple currencies, mileage or per diem type of rate-based expenses. The software is also available on all the devices you would wish to use.
Reporting is also a critical issue to consider when shopping for an expense tracking tool. An expense tracking solution which provides reports in an easy-to-understand format will allow you, your project team, and accountant to be in sync throughout the project duration.
AccountSight offers powerful features which boost productivity, maximize the precision and timeliness of expense reporting, enable better tracking and compliance, and improve the overall project experience.