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How to keep track of business expenses?

Question asked by Michael Joseph Wdowiak Beijer 4 years ago

Okay, maybe this is a stupid question, but I'm looking for a simple way to keep track of my business expenses.

Under the Purchases tab I found the following tabs:

Bills, Credit notes, Recurring, Purchase orders, Money out

Which one should I use to keep track of business expenses such as:

  1. spent £xxx on new work computer
  2. spent £xxx on printer paper etc.

Michael

3 Replies

Hi Michael

There are two main methods of recording expenses:

  1. Enter suppliers bills, in other words record the expense as you receive the paperwork, rather than when you actually pay for it. This makes sense if you are getting stuff on credit, ie get the service/goods today with a bill, but don't pay for it for 30 days (or more).

This is the method you've asked about above, under the Purchases tab.

The mechanics of the above are that the expense is recorded on one side and, on the other, a debt is recorded to the supplier (known as a trade creditor). At sometime in the future, you'll pay off the bill and so the bank balance reduces and the debt is extinguished

  1. You enter the expense straight from the bank transaction, ie bypassing putting the bill in first then paying it off.

You do this from the Bank menu, either by entering "Money out" transactions. one at a time, from the appropriate bank account or, more usually, by importing a bank statement then going through each line telling it what the payment was for.

So the mechanics here are than the bank balance reduces and an expense is recorded.

Many businesses use only method 2, but as many more use a mix of 1 & 2, it depends on what provides the most accurate accounts and what is quickest. Ltd companies must record expenses as they are incurred (billed) and so, for larger purchases they will tend to use 1.

There is a lot more to this than the above and it might be worth your while doing some basic bookkeeping research as all systems use the above methodologies.

A few other things, you mention Money out in the purchases tab. This is badly worded as it clashes with the same description in the Bank section. The purchases version is for money paid on account, ie if you send a supplier £100 now and the bill arrives later, the system holds the cash in hand and you then allocate it against the bill when you enter it.

Consumables and overheads, like printer paper, travel, services etc are recorded as an expense against profits today, whereas items of equipment, like the computer, which will last you a few years are "Fixed Assets". These are put to the appropriate Fixed Asset code and then written off against profits over their useful life.

Unless already their, you can turn on the Fixed Asset register in Toggle features to enable this. Every time you put a purchase to one of the fixed asset account codes it asks you to fill in the details of the asset and asks how you want to write it off.

All of the above stuff about the two methods of getting expenses into the books applies to sales, ie you can record the sale by generating an invoice in the sales menu, or by recording the money hitting the bank account.

Finally, it's worth a look at the guides online for the various parts of the software.

Whoops there are two 1s! sorry

Wow, thanks for such an extensive answer, Paul! I've added it to my info file re ClearBooks and accounting, etc.

I definitely have a lot to learn still about accounting, but am very happy I made the switch to ClearBooks from my old system.

Michael

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