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4 Tips In Using Credit Cards To Track Expenses
While the phrase cash is king is still as relevant today as it was decades ago, there is no denying that markets around the world are moving towards a cashless economy.
Even if for some reasons the cons outweigh the pros, going digital is just the trendy way to go.
In business, tracking the movement of cash is a top priority. Cash presents a set of problems that will never go away.
Therefore, unless absolutely necessary, it is safe to say that going cashless is usually a method of choice for businesses.
For example, if your rental property business requires you to frequently make purchases at the hardware store, paying cash can be a cumbersome task.
There are the risks of:
- Paying more than the stated price
- Cashier giving the wrong change
- Lost of money from absent-mindedness
- Failure to collect receipt due to forgetfulness
- Lost of receipts
As you can see, cash can present many problems for a business.
Using a credit or debit card for all expenses will make bookkeeping a much easier task, especially if you are doing your own accounting.
As there is a real trend of real estate business owners moving towards systems like digital payments for expenses, you might be thinking about solely using credit cards for the same purposes too.
Here are some things that might help you create an expense cash tracking system.
1) Only use one card
It is a very common practice for small business owners, especially sole proprietors, to mix up their credit card and use personal cards for business expenses.
While you might feel that there is nothing wrong with it, such practices only add onto your accounting burden when the time for reporting arrives.
I would go as far as to suggest that there should be one card used solely for business expenses.
This is so that all transactions are as clear as day. The monthly credit card bank statement would serve as your statement of expenses. Making it all so easy to track them.
You can depend on the bank to do that job for you.
Avoid using this card for anything else.
2) Keep purchase receipts
When you have allocated a specific card for expenses, it is very easy to ignore the importance of keeping all the transaction receipts.
This is the wrong way to look at it.
Firstly, keeping receipts allow you to match them against all the transactions stated in the card statement.
Secondly, depending on your nature of business and accounting requirements, receipts might be necessary to complete your auditing requirements.
Thirdly, you would be able to identify expenses which you made in cash when you tally receipts to card statements.
Fourthly, it would be easier to track expenses made that are for more than one property.
As you can see, keeping receipts even though you are using a card solely for expenses does have it’s advantages.
3) Alternatively use a debit card
Sometimes you are unable to get a credit card for whatever reason. Or your company is unable to obtain one because it is simply too young.
Maybe you simply refuse one in fear of being sucked into the credit and debt trap.
In this case, consider using a debit card instead.
It serves the same accounting purpose as a credit card, but prevents you from overspending or paying a credit card service fee.
However, do keep point #2 in mind.
4) Settle the balance each month
The danger of using credit cards is overspending.
This is why you must pay off the balance monthly religiously.
The moment you start developing the habit of owing money, the more you would start feeling that it’s okay to do so. Before you know it, you would be drowning in debt.
That’s without mentioning the carnage it could cause on your credit score.
Anyway, if your business is going in the red each month, you need to review how you are conducting business. Or if you should be doing business in the first place.
While using credit cards as a method to track expenses systematically, don’t forget to keep receipts so that a manual audit is still a dependable back up plan.
And do be aware to avoid the credit trap as much as possible.