Tracking Expenses for Small Business 101

My name is Autumn and I’m a serial entrepreneur from Detroit. As the co-founder and CEO of Detroit Dough, an edible cookie dough manufacturer, I’ve grown my idea to a 6-figure business in less than a year and raised over a quarter million dollars in funding. I’ve also started Proxie, a brand that bridges the gap between business resources and black women business owners like myself.

I’ve partnered with HoneyBook and Rising Tide to develop a three-part blog series about accounting to help entrepreneurs, creatives and freelancers understand bookkeeping in an easy and judgement-free way. At the end of this series, you should be empowered to master HoneyBook’s bookkeeping features and understand your business’ story through powerful financial data.

Tough Reality

We’re pulled in so many directions as entrepreneurs. Not only are we the creatives and the solution-generators of our brands, but often times find ourselves having to  be the secretary, marketing agency and lawyer.

For most of us the last role we want to play but are forced to is bookkeeper.

I get it – accounting is overwhelming. In fact, you’re not alone, nearly half of businesses owners dread doing their own accounting and finances according to Entrepreneur.com. However, if you want your businesses to be profitable, you have to have a real understanding of both revenue and expenses, and tracking expenses for small business is key.

Bright Spot

What’s great about HoneyBook is that the software really helps manage the revenue side of your business, but did you know that it helps manage expenses too? That’s why this first blog post is all about expenses. We’re digging into the basics of expenses and how to track them in HoneyBook to become a bookkeeping pro for your business!

Manage everything—including expenses—in one place


With HoneyBook, you can keep everything in one place with one online tool that simplifies managing documents, payments and client communication.

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As a business owner, you may have purchased business cards, signed up for a subscription service (like HoneyBook!) or bought new equipment. Simply put, all of the costs and purchases you’ve made for your business are expenses. The costs of doing business is incredibly important to track for a few reasons.

First, your revenue is not a real indicator of your business’ success. If you’re spending more money than you make, eventually you’ll run out of cash to do business so tracking them will show you if you’re truly making money.

Secondly, it helps you to identify your cost per each product or service. Having true transparency of what it costs to produce one unit of your product or provide one service can definitely help you price yourself better and find areas to reduce cost.

Lastly, it helps you to forecast profit overtime. If you have a list of historical expenses, you can accurately forecast the amount of profit you’ll have over future months.

Common Ground

I know what you’re thinking – I know how important it is to track my expenses but how do I actually do it? What’s great about HoneyBook is that there’s a bookkeeping tool already built into your dashboard!

While HoneyBook helps you optimize your sales generation funnel, you can easily input your expenses to get the full picture of your both your profit and loss.

When adding in your expense transactions in HoneyBook it is important to classify them correctly. Accounting transactions are often times classified into “buckets” or referred to as accounts that help you and your accountant accurately understand how you’re spending your money.

When tracking expenses for small business, here are a few common accounts that your expenses will fall under:

  • Cost of Goods Sold – These are the costs directly associated with selling your products or services. You can also think of this account as the price of your product or service without any mark-up. Some examples of this account are packaging, raw goods, or shipping. If you are a service-based business, sometimes this account can be hard to classify. Some examples of service-based cost of goods sold expenses are merchant fees, commission fees and transaction fees.
  • Marketing & Advertising – This expense is the cost to market your product. Some examples of this account are social media ads, branding costs, or website development.
  • Dues & Subscriptions – This account captures all of the monthly subscription services that you purchase for your business. So any professional services like Adobe Suite, HoneyBook, website hosting, cloud storage or others would go here.
  • Salaries & Wages – This account captures all of the wages and salaries that you pay to your employees and yourself. If you have employees or pay yourself a salary, you want to place that expense here.

What’s awesome about HoneyBook is that they already have a list of 35+ expense accounts to choose from so it helps you take the guess work out of classifying your expenses. Additionally, if you have a one-time expense for a specific client, you can include the project name next to the expense for more insights into project expenses and overall profit.

Manage everything—including expenses—in one place


With HoneyBook, you can keep everything in one place with one online tool that simplifies managing documents, payments and client communication.

START FREE TRIAL

Let’s explore a couple scenarios of expense tracking. Let’s say you’re a freelance artist developing a commission piece for a client. You’re currently using HoneyBook as your CRM so when that expense hits your account, you place it in the Dues & Subscription Account. You buy a new canvas for the painting so that canvas becomes a part of your Cost of Goods Sold. Lastly, you decided to rent a studio to finish your piece so the studio rental cost would be assigned to the Rent account. Pretty easy right?

Let’s look at another scenario – let’s say you’re a business strategy consultant for online businesses. You generate a lot of your clients through Facebook, so you run Facebook ads every month. That expense would fall under Marketing & Advertising. You rent office space so you pay monthly expenses like electric and water, so these costs fall under Utilities. Lastly, you purchase a work laptop and accessories so that would be placed into your Computer & Internet Expenses. Once you learn how each transaction is classified, it helps you to easily assign these transactions and keep your bookkeeping neat and tidy.

After you’ve input all of those transactions, HoneyBook shows your Profit and Loss Statement. Profit and Loss (often times referred to as P&L or Income Statement), showcases a summary of how much you’ve made or lost after all of your revenues and expenses are tracked. This is a “period of time” report, meaning that this summary covers data over a designated range of time. This is one of the most important statements for businesses so make sure you keep this updated!

Here’s how P&L Statements are structured:

  • Revenue – The money you’ve made (pretty easy right). HoneyBook automatically imports your revenue for you.
  • Cost of Goods Sold – As mentioned, all of the costs associated with selling your products or services
  • Gross Profit – Gross profit is the profit or loss after subtracting cost of goods sold. This is a great calculation to help you determine if your cost per unit is appropriate in comparison to your price
  • Expenses – All other costs associated to your business (outside of cost of goods sold)
  • Net Profit/Loss – Gross profit less expenses. This is the summary of all of your revenues less expenses which lets you know if your business is profitable or not.

Manage everything—including expenses—in one place


With HoneyBook, you can keep everything in one place with one online tool that simplifies managing documents, payments and client communication.

START FREE TRIAL

Again, your P&L is so important for the overall health and growth of your business. We’ll dig into uses of this statement later in this blog series.

So there you have it!

I hope this blog post helped you learn a little more about expenses and how to track them with HoneyBook.

Here’s a few best practices before you try it out yourself:

  1. Try to track expenses for your small business as soon as you can! It’s a lot easier to remember what you spent when it was a recent transaction
  2. Batch import your expenses using a .csv file. You can always download your bank transactions and import relevant expenses to save time
  3. If you don’t know how to classify an expense, mark it and ask an accountant, friend or google!

If you have any more questions about bookkeeping or tracking expenses for small business, feel free to reach out via email!

Proxie also has an incredible business plan and strategy course called Proxie Launch and we’d love to have you join! Learn more about it here and sign up for the waiting list. Also, don’t forget to follow Proxie on Instagram and Facebook at @proxiedetroit.

Autumn Kyles

Autumn, founder of Proxie, is a community leader, serial entrepreneur and business enthusiast. As co-founder and CEO of Detroit Dough, an edible cookie dough manufacturer, Autumn led her business from idea to 6-figure venture in less than one year. Today, Detroit Dough has made over $300,000 in sales, about 70,000 cups of cookie dough sold. She has also won over a quarter of a million dollars in funding for her business from brands like Quicken Loans (Detroit Demo Day), Samuel Adams, Michigan Women’s Forward and others.

She noticed that small business owners were looking for resources to start and grow their businesses during the pandemic. In early April 2020, Autumn started Proxie, a brand to bridge the gap between resources and small business owners with a focus on black women entrepreneurs. In 3 months, Autumn has been able to amass a 750+ community of new business owners from all over the country.

As a HBCU Graduate of Hampton University with both a bachelor’s in business administration and an MBA, she is more than equipped to educate entrepreneurs on business strategy from a theory and practical perspective. Autumn is a R&B music enthusiast, shameless reality TV watcher and Detroiter to the core.

 

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