You know that frustrating feeling you get when you sit down to work on your taxes and can’t make heads or tails of that ominous box of receipts? You know how that feeling gets worse when you realize that you actually only saved about half of the receipts from all of your legitimate business expenses throughout the past year?
What if you didn’t have to have that feeling next year? What if you put a simple system in place starting today that would allow you to keep track of all of your real estate business expenses for the entire year without too much work or aggravation?
In order to make everyone’s life a little easier come tax season next year, we’ve pulled together five simple hacks that, when combined, will revolutionize the way you track your expenses.
Ready to get started?
Get the Right Software
The first step in mastering the tracking of your business expenses is to find the software that best suits your needs. Luckily, there are literally hundreds of options to choose from! Play around with a few of the top options and see which one best fits your personality.
Ideally, the perfect software for you should have an easy to use mobile app that will let you record transactions right in the field. One free option that works great for tracking all of your personal and work-related expenses is mint.com, which can pull all of your personal accounts and transactions onto one dashboard.
Other popular options include Concur, Expensify, and Shoeboxed.
Having all of your transactions for the year available in one place is the foundation that will allow you to implement the rest of our simple tracking hacks.
Scan Every Receipt
Having all of your transactions at your fingertips is a great start, but should the IRS ever decide to audit your expenses, you are going to need to have copies of the actual receipts to prove that the transactions were indeed business expenses.
The best way to make sure that you have all of your receipts is to scan each and every one of them. Many of the expense tracking apps you experiment with will have these features built right into them, but you can also start an Evernote notebook and upload pictures of every receipt while you are out in the field.
Regardless of what software option you choose, make sure to include a few notes about the business nature of each receipt. You might have a hard time remembering which client you took to Dunkin’ Donuts and what you discussed three years from now when the IRS is asking, but if you took a minute to make some notes, you’ll be covered.
Record As You Go
One of the biggest mistakes that many good-intentioned real estate agents make when attempting to track their expenses is letting those receipts build up in the car or on a desk and then entering them into their tracking software in bulk. This is a recipe for disaster!
The longer you let that backlog of receipts accumulate, the more work it is going to be to get yourself caught up, making you less and less likely to actually do it with every additional receipt.
The most effective counter to this tendency toward procrastination is to make a point to record each and every receipt immediately after the transaction. If you never fall behind in processing your receipts, you won’t ever have to procrastinate on getting caught up.
Use Credit Cards Over Cash
Many smart real estate agents have established a separate credit card that they use exclusively for their business expenses.
Those credit card statements can be extremely valuable as a backup to make sure you don’t miss tracking any expenses.
Plus, some cards also hook you up with some great rewards options on expenses that you are already writing off!
Use Tags Liberally
The final step that pulls everything together is using the tagging technology in your tracking software to group all of your expenses into categories.
Start by tagging your expenses into broad categories, then shift into more detailed tags over time.
At the end of a full year of expenses, this will give you more information about where you are focusing those business expenses. And since information is power, you will be in a great position to determine what types of expenses are producing the best results.
None of these simple hacks are going to completely automate your expense tracking on their own.
But if you employ them all together on a consistent basis, you will find that the amount of work required is minimal and your return on investment for that work is excellent.