Monthly Expenses: The Importance of Controlling Expenses

In a market where businesses are increasingly dynamic, controlling monthly expenses is the starting point for business success.

For this reason, and in order not to harm the profitability of the business, the entrepreneur must know the financial situation of the business.

In this post experts from SPV Mortgages tell you effective ways to control your monthly expenses, avoid financial pitfalls, and stay financially secure.

The monthly expenses of the companies

In the day to day business, various resources are used, both physical, human, and financial. When it comes to financial resources, such as expenses for production, maintenance, and business growth, it is essential that these are continuously monitored.

The control of monthly expenses allows obtaining relevant information on the profitability and performance of business activities. In addition, it also helps in planning and making decisions about future investments.

Of course, good control depends on discipline and organisation, which are the foundations for the success of any business. However, given the dynamics of the market, financial control is increasingly difficult.

There is a lot of data and documents that need to be recorded and analysed so that businesses can grow sustainably. For this, it is essential that entrepreneurs have the ability to control the financial movements of identification, registration, and analysis of monthly expenses.

These actions make it possible to identify extraordinary expenses or, at the same time, necessary investments to guarantee the evolution of the business.

In this way, the control of expenses is the most effective measure to maintain the financial and organisational soundness of companies. When good control is done, the tendency is to spend less and get more profit. But how can we ensure effective financial control?

Strategies for good financial control

Maintain organisation

To maintain effective financial control, it is important to adopt tools and work methodologies that are appropriate to the reality of the business. At the same time, for a company to work efficiently and organised, there must be harmony and integration between all collaborators and activities carried out.

And since it is the different people and activities that generate the monthly expenses, organisation and integration are essential so that the financial evolution of the business is not affected.

Structure a financial plan

Structuring a good financial plan is essential to maintain control of monthly expenses.

This means that it is not enough to know how much the company spends monthly. You also need to determine how much the business can afford to spend each month and how much it has actually spent.

This will make it possible to analyse the difference in value between planned and actual expenses. For cost control to be effective, a financial plan must be structured for each month of activity.

Prepare reports

After structuring a financial plan, it is best to prepare reports that record all the monthly expenses of the business activity. And for this, why not use technology to your advantage?

Billing software makes it possible to simplify the management of business activities through automated processes that offer valuable information for the decision-making process.

How to keep a book of income and expenses?

The income and expense books are the control mechanism with simplified accounting, so they are not required to keep the book of purchase and sale.

What should be considered to keep a book of income and expenses?

You should not forget that there are other auxiliary books that can accompany the income and expense book to have a more organised accounting.

It is important to know that taxpayers in the mining sector, customs, and brokers, who classify as first category taxpayers, cannot benefit from simplified accounting.

What should a revenue and expense book contain?

An income and expense book must be authorised according to the tax regime since those who have complete accounting are not authorised to carry out this accounting book.

That said, you should take into account the following background information when putting together your income and expense book:

Chronological and clear record, according to the flow of all income received and accrued, as well as those paid or owed that the line of business has.
For both cases, whether income or expenses, they must be entered with a correlative number (1, 2, 3, and following).
The number of the document that supports the income and/or expenses must be entered.
The type of document that is supporting the income received or the expense actually paid (Invoices, certificates, Fee Tickets, among others) must be identified.
The supporting documents associated with income and expenses must consider the registration of the taxpayer who issues it.
In relation to the dates of operation, they are recorded according to the format dd/mm/yyyy.
As in the cash book, the record of operations that have only been accrued must consider the date of the document. In the case of operations received at the same time they are earned, the date of the document will be recorded, and in those cases in which the receipt of the amounts earned has been previously, the date of receipt must be recorded.
The record in the income and expenses book must take into account that the income received or accrued and the expenses paid or owed must be expressed, depending on the type of movement.
A gloss must be incorporated according to the operation carried out, that is, whether it is an income or an expense.
The operation must be identified and indicated if it corresponds to accrued income or expenses, as well as indicate if the amount is related to accrued income or expenses owed.
In relation to accrued income and expenses owed at the end of the business year prior to entry into this regime, it must be taken into account that these should not be recognized by the taxpayer at the time of receipt or subsequent payment, as appropriate, without prejudice to its registration and control obligation in accordance with the income tax law.
It is necessary to indicate that, in the calculation of the tax base for your tax compliance, taxpayers under this regime must include all income and expenses, regardless of their origin or source or whether or not they are amounts not taxed or exempt by this law.
The book of income and expenses may be manual or computerised.

Other important considerations in an income and expense book

Remember that an income and expense book is a tax obligation, according to the regime you belong to, for which the following can be rescued from this auxiliary book:

It allows you to have efficient accounting in the order of accounting movements.
You will be able to handle accounting that allows you to make decisions for optimal business management.
You will know how your business behaves financially and you will be able to act in time in case of problems.
These must be registered on a monthly basis and are subsequently taken into consideration for the calculation of the annual summary.
This book will allow you to calculate a % of sales revenue.
You will be able to identify the utilities.

Conclusion

It must be taken into account that the income and expense book must allow for the recording of all movements according to their supporting documentation in a chronological manner and comply with everything required.