Monthly expense planning is a staple of personal finance.
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You probably invest several hours a month paying bills, balancing your checkbook and reviewing upcoming expenditures. If you're lucky, you've organized your finances in way that maintains an accurate and up-to-date record of every dollar that leaves your bank account.
So why wouldn't you invest the same amount of effort into business expenses planning? It's not uncommon for small business owners to plan their monthly expenses with little more than a stack of pending invoices and a severely under-utilized business accounting program – clearly not the level of recordkeeping that's necessary for your business to function at peak levels.
The reality is that a monthly expense report forms the basis for several mission critical small business reporting vehicles. Failure to generate a consistent mechanism for monthly expense reporting and planning inevitably leads to missed payments, constrained cash flow and ineffective forecasting. If you haven't already integrated a monthly expense report into your regular routines, here's the information you need to get started.
- Report data fields. A monthly expense report is essentially an itemized written or electronic record of your company's monthly expenditures. The data fields in your company's monthly expense report should be tailored to include categories that are relevant to your business model. Fields like data, payee and check number are standard. However, you should also include fields that classify the expense into categories (e.g. payroll, utilities, etc.), keeping in mind that a single payment can include amounts in several expense categories. The benefit of categorization is that it accurately identifies expense data that will later flow into your accounting program.
- Cash flow analysis. Monthly expense reporting plays a central role in the creation of a monthly cash flow analysis. In some cases, you can use the report to accurately predict the expenditures that will occur over the next thirty days. If lack precise information about upcoming expense amounts, you can rely on previous months' expense reports to make an informed estimate about this month's expenses.
- Budget forecasting. Many businesses rely on monthly expense reports during annual budgeting processes. Although budgeting data may be culled from a business accounting application, monthly expense reports serve as the source for the data that will be used to prepare highly detailed and accurate budget forecasts.