5 Good Financial Habits to Build in 2022

If you’re looking for the key to financial success, then we have the answer: financial habits ? good financial habits to be exact. Financial habits are the values, standards, routine practices, and rules people rely on to handle their day-to-day financial lives. They help you manage your money properly and respond quickly to financial decisions or issues.

If you want to know how to manage your finances more wisely, read on to find five good financial habits to build in 2022. 

1. Review and update a financial plan regularly

The first thing to consider when building good financial habits is a financial plan. It’s a document that contains information on an individual’s present financial situation, long-term monetary goals, as well as strategies to achieve those goals.

Your financial plan helps you assess, plan, and improve your present and future financial situations. It provides a snapshot of your present finance and your goals to develop an action plan that you can use to navigate financial decisions with ease.

Creating a financial plan, though, isn’t enough. It’s fairly important, if not more important, to evaluate and update your plan on a regular basis. 

A regular check at least once a month is a must to make the most out of your plan and enhance the chances of reaching your goals. It’s also recommended to update any important information at least every three to six months. It’s also important to update your plan when a major life event occurs, such as buying a new house, getting married, or finding a new job.

2. Set financial goals 

The most crucial step toward financial success is to set goals. You will not be able to measure your progress unless you have goals. When forming goals, it’s recommended to follow the “S.M.A.R.T” goals strategy: specific, measurable, achievable, relevant, and time-bound.

Here are a few examples of SMART financial goals: 

  • Pay off $20,000 of debt in 6 months 
  • Create a $15,000 saving account this year
  • Buy a $100,000 property in 7 years 

As you can see, these examples closely follow SMART principles, with each goal being measurable and time-bound. As a result, you can easily keep track of your progress and be able to reach your goals within the expected time. The SMART principle is specifically useful for making a goal as it points out any relevant factors associated with your goals. For example, a SMART goal “Pay off $20,000 of debt in 6 months” is definitely more powerful than a vague goal such as “pay off debt soon.”

3. Create a budget

Making a budget is another good financial habit to build because it ensures you’ll be spending money efficiently and not spending more than you can afford. A personal budget lets you know how much money is going in and coming out of your account every month. Without it, you may be spending more than you make — leading to a paycheck-to-paycheck lifestyle. 

When making your budget, keep in mind to include the amount of money you bring in every month from your paycheck, the money you typically spend on “needs” such as living expenses and groceries, and the expenses you allocate for “wants” like eating out, travel and shopping.

If you’re not sure where to start, consider these budgeting tips to help you get started.

4. Utilize an expense tracking app

A budget lets you know how much money you’ll get and spend each month. An expense tracking app, on the other hand, allows you to compare if the amount of money you expected to use is lower, higher or equal to what you actually spend.

Expense tracking apps are becoming more popular and are likely to completely replace manual expense tracking. It’s because by using an expense tracking app, you can improve productivity and reduce paper waste. Moreover, with expense tracking apps, you can scan and store your receipts on the cloud, which is more secure than keeping them in the physical form.

If this sounds like just what you need, start using an expense tracking app now! Shoeboxed is an expense tracking app that lets you turn your receipts into data and then organize, make reports and analyze your current financial position at any time and anywhere. It’s an ideal tool for individuals and businesses. Check out Shoeboxed and start your free trial today!

5. Build an emergency fund

In contrast to fixed expenses that recur every month with an amount you can anticipate and set aside, there are also unexpected expenses. This type of expense sometimes is impossible to foresee. For example, a leaking roof, a broken dishwasher, or even a surgery for your pet are situations when you have to let your money come out of your pocket without planning for it.

That’s why you have to build an emergency fund. An emergency fund is a safety net that ensures you don’t have to delve into other cash set aside for everyday needs. If you don’t have one, chances are you’ll have to “touch” the money set aside for credit cards or other bills to cover the emergency expense. 

Experts recommend creating an emergency fund that covers three to six months of living expenses. This is especially true if you only have one source of income. 

If you haven’t started working towards this financial habit, start putting money aside for emergencies, even if it’s just a tiny amount from each paycheck. You’ll be grateful in the long run!

The bottom line

There are many good financial habits you can start adopting this year. Some can be easy — like reviewing and updating your financial plan regularly while others are more demanding. And if you’re new to working towards these habits, it can be a little time-consuming and laborious. But it’ll pay off in the long run. 

If you’re interested in entrepreneurship stories, business tips, or productivity tools, find more posts like this on the Shoeboxed Blog. Shoeboxed is a cloud-based software that helps individuals and businesses turn their massive paper receipts into digital data. With Shoeboxed, you can accomplish a variety of tasks: scan, store and organize receipts, manage expenses, store business cards and even track mileage for business travelers. It’s simple to install and easy to use. Try Shoeboxed today!

5 Tips to Control Your Business’ Expenses

“You have to spend money to make money”, that’s undeniable. Before a business can gain profit, it must first invest in designing your office space, equipment, etc. Unless you’re a fully remote business otherwise, you also have to spend money to rent an office and hire employees. There are budgets for marketing and sales campaigns too. 

Expenses are a necessary part of any business. But if you don’t control your expenses, chances are you’re likely to run out of funds. Worst case scenario, your company is deep in debt. That’s why it’s always important to have some plans in place to control your expenses. 

Do you know what exactly business expenses are and how to control them? If you have to think about it for more than a minute, it seems like you don’t really have a good grasp on it. No worries. We’re here to give you insight into business expenses and tips to control expenses better. 

What are business expenses?

Business expenses are costs required to run a business. It could be anything from the money you pay to rent an office to the funds for your employees’ training courses. Knowing types of expenses allows you to classify your expenses into the right group and manage them better. 

Typically, these expenses are categorized into three groups: fixed, variable, and periodic expenses. Fixed expenses are costs that remain constant for a period of time, such as rental, employee salaries, or interest charges. Variable expenses, on the other hand, are costs that fluctuate over a period depending on the situation. Examples of variable expenses are raw material and direct labor costs. Periodic expenses incur less frequently than fixed or variable expenses. They’re payments for some special occasions such as education fees or travel expenses. 

5 tips to control your expenses better

1. Make plans and stick to the budget

Doing business is like a running marathon, not sprinting. Aim for long-term progress, and don’t expect sudden good luck to carry you through. You need to understand your company’s mission and vision, evaluate where your business is now and where you want to take it in the future. 

A thought-out road map is essential to forecast expenses and allows you to stay within budget. For example, if you want to expand your business to other countries in the next year, you’ll need a plan with clear goals and budgeted expenses. 

2. Manage fixed expenses

Fixed expenses are costs that remain constant throughout a particular period. The reason why these expenses stay unchanged is that they are not directly associated with manufacturing or the business’s performance. As a result, fixed expenses are considered to be indirect costs. 

To determine the fixed costs, think of the expenses you have to pay whether or not your company operates. For example, due to the outbreak of the Covid-19, many companies are being forced to shut down their operation temporarily. Though there are no operating activities, businesses still have to pay for fixed costs such as rent and interest charges. It’s important for business owners to understand the incurred expenses to manage and control them effectively. 

Fixed costs are more controllable than variable costs. As a result, managing those expenses is less stressful and you can be more flexible if anything happens. Because fixed costs such as rent are established by contract agreements, if the landlord wants to charge higher rents in the future, they will have to notify you in advance. You’ll be aware of this change quite some time before it happens, thus coming up with different plans to deal with it. 

3. Manage variable expenses

Variable expenses are costs that fluctuate from month to month. The payments you make in a given month could be different from your earlier bills or ones you’ll make in the future. Managing variable costs is no easy game for business owners. Therefore they have to understand the dynamics of these costs to stay competitive. 

Variable expenses are costs that are associated directly with business activities. These costs are also known as manufacturing costs. They include raw materials, inventory, and direct labor costs. 

Manufacturing costs rise either when the production goes up or costs of material rise. If manufacturing expenses and production volume go hand in hand and increase simultaneously, the business is more likely to witness a profit. On the other hand, if manufacturing expenses climb as a result of surged material costs, they are sure to hurt the business’s profitability. 

To control variable expenses better, make sure you have at least three to five vendors for a particular material. It’s a poor bet to rely only on one supplier. Imagine if your sole supplier goes out of business suddenly, and you have no other suppliers to turn to; that’s horrible. 

Also, once you have several suppliers, review them regularly. It’s standard practice to make an annual or semi-annual review of all your key vendors. It allows you to track which vendors are doing more business with you or who offer you the best price. 

4. Manage periodic expenses

As its name suggests, this type of expense doesn’t occur monthly or annually like fixed or variable expenses. You’ll be surprised to know that these expenses are not associated with operating activities or manufacturing activities. However, there are some occasions that you’ll need these expenses, so you have to be aware of this and make a budget for them.

Periodic expenses include education expenses, networking expenses, travel expenses, etc. Is it necessary for your marketing team to update their knowledge and technical skills? Absolutely! A collection of skillful marketers will develop and execute strategies more effectively, which maximizes profits for the company. It sounds like a good idea to invest in a training course for your team. Or do you want to expand your contacts to gain more opportunities for your business? Then you have to go to a conference or a seminar and network. It’s the company’s responsibility to pay for such expenses like this. 

5. Track expenses 

Tracking expenses allows you to control them better. When an expense occurs, bookkeepers keep the receipt and record it into the account book. By doing so, bookkeepers can calculate how much a business spends in a month and create a report on spending habits. 

A business generates hundreds of documents per month including receipts, invoices, proposals, etc. It’s a labor-intensive task to categorize and record those documents manually. 

Gone are the days when bookkeepers had to do everything manually. In this technological era, bookkeepers use software to manage their work more efficiently and cut away many tedious tasks. Shoeboxed is a cloud-based software that helps businesses turn their massive paper receipts into digital data. You can get your receipts scanned, stored, and organized by your mobile app. It’s simple to install and easy to use. Start using Shoeboxed today!

The bottom line

Expenses are a necessary part of any business. They can make or break your business’s profitability. That’s why expense control is so important to every business. For those who’re looking for tips to manage their expenses better, following the advice you read in this article will be just what you need.

Why Are Bank Receipts Important to Every Business?

What documents are crucial to a business? Business plans, marketing strategies, or financial reports? The answer is all of them. How about receipts? Don’t forget about them because they are also important. 

There are three types of receipts that greatly impact a business: sales, expense, and bank receipts. Sales and expense receipts are necessary to calculate a business’s cash flow, while bank receipts contain detailed information about financial transactions conducted at banks.

There’s no doubt that many of you have heard about the importance of sales and expense receipts before, but not many people talk about bank receipts. Therefore, in today’s article, we’ll give you some insight into bank receipts and what makes them important to a business. 

What is a bank receipt?

We all know what a bank receipt is to some extent, but let’s break down what exactly we mean by a bank receipt before diving into why it’s important for every business.

Bank receipts are standard forms of documentation for most financial transactions. A bank receipt denotes all information related to the financial transactions conducted during your visit to a bank. Whatever your purpose to visit a bank is, either to deposit or to withdraw funds, you’ll walk out the door of the bank with a receipt. 

Typically, there are two hard copies of receipts given to both parties involved in the transaction. An account holder who conducts the transaction will get one copy while the bank keeps a similar piece. These days, many banks offer their customers a digital copy of receipts, by email or via text message, as an alternative. 

Bank receipt templates vary from bank to bank, but there are some essential pieces of information that every bank receipt includes. Mandatory details of a bank receipt include:

  • Bank account numbers
  • Account holder name(s)
  • Date of transaction
  • The total amount of the transaction

Sometimes a bank receipt includes detailed information of the bank teller who assists you with your financial transaction.

4 reasons businesses should keep bank receipts

1. Track cash flow

If you open a business checking account at a bank, you’ll receive a monthly bank statement from your financial institution. These statements summarize all your business transactions in a month with a detailed list of beginning and ending balances, as well as deposits and withdrawals. 

Generally, you’ll review your monthly bank statement and compare the transaction details with your bank receipts to keep track of your business’ spending. The bank receipts are also helpful when used along with the monthly bank statement to monitor any fraudulent charges or mistakes.

2. Solve a dispute

If there’s a dispute arising around a transaction, a bank receipt serves as trustworthy evidence. Whether a bank teller makes an error during a transaction or you accidentally miscalculate a portion of a transaction, bank receipts make it much easier to resolve disputes.

Imagine that you visit a bank and make a deposit of $50,000, but a bank teller accidentally deposits the funds into the wrong bank account. You’re actually unaware of this and leave the bank without knowing there’s a huge problem. When you realize the $50,000 deposit is missing from your account, sure it could lead to panic! 

Soon after that feeling is gone, you’ll start searching for an answer to that question. You’ll want to know what happened to your money, whether a mistaken transaction has been made, or a cyber fraud has occurred. You check the bank receipt and notice there’s an error in the bank account number. You then return to the bank to dispute the issue. The bank will use its receipt to confirm the transaction error. The dispute will peacefully be resolved. 

3. Keep the bookkeeping accurate and up to date

Bank receipts are generally a very helpful tool for your bookkeeping practices. Bank receipts are proof of all the financial transactions that impact your cash flow. Many banks recommend businesses balance their account books on a monthly basis. Therefore, accountants or bookkeepers will go over monthly bank statements and cross-reference this data with the bank receipts which have been gathered for a given month. 

Bookkeepers also use bank receipts for data entry purposes to track credit card payments, which can help you stay on top of your payments. With good bookkeeping practices, bank receipts can even help you improve your credit score over time.

If you’re a big business which has plenty of receipts, cross-checking data from bank statements and bank receipts manually can be labor-intensive. Many companies have switched to a digital bookkeeping tool which can do the same job as a bookkeeper but can be more efficient to some extent. 

A bookkeeping management software allows businesses to scan, store, organize and track receipts with ease. Bookkeeping software developed by Shoeboxed is an ideal tool for every business. Not only can you organize and track receipt data, but you can also use Shoeboxed to make expense reports for tax preparation or reimbursement.

4. Claim tax deductions

When you’re running a business, you must pay tax. It’s a legal obligation. There are several taxes that every company has to pay, and it’ll result in a loss of your profit. But, there’s also a tax deduction that lowers an organization’s tax liability. 

Deductions are typically expenses that the taxpayer incurs during the year that can be applied against or subtracted from their gross income to figure out how much tax is owed. The tax deduction rate varies from company to company, depending on whether you run the business as a sole proprietorship or use a legal entity such as an LLC or corporation. All in all, businesses often claim tax deductions to save some money. 

No matter if you’re a home business or big-name company, you’ll go through the same tax reduction process. The first step is to collect proof of purchase for your business expenses. Bank receipts which record all your expenses in a given year are solid evidence. Next, you just need to find the right tax form and fill in all the details. The last step is to submit the tax form, and you’re good to go.

The bottom line

Bank receipts are of no less importance than any other documents in a business. Bank receipts allow businesses to track their cash flow, solve disputes, keep the bookkeeping up to date and even claim tax deductions with ease! If you think they’re important and should be kept in a safe place with high accessibility, think of scanning and storing them on the cloud. Shoeboxed allows you to turn that awesome idea into reality. Try Shoeboxed today!