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Yesterday I talked about separate bank accounts in your craft business. Today, let’s look at expenses. Do you ever ask yourself: Where does all my money go? Or, why don’t I have as much money as I thought I did in my business bank account? I know I do! A spending audit is an easy way to see where your money is going.
How to Conduct a Spending Audit in Your Craft Business
I do spending audits every single month. If that’s too much for you, feel free to do them quarterly.
- Log into your online accounting program and print out an expense statement. How you do this will vary depending on what system you use.
- Get out a blank piece of paper and three different highlighters or markers. On the piece of paper, write Essential, Questionable, and Not Needed. Highlight each of them using a different color. This will serve as your ‘key’ while you are going through your expenses. Also, it serves as a place to write any notes as you go.
- Grab that log of expenses and one by one start going through each line item. Highlight each expense with the appropriate color for Essential, Questionable, and Not Needed.
Taking Action on Your Spending Audit
- After you’ve finished your spending audit, take action:
- For things you’ve highlighted as Essential: Leave them alone. These are the things that you need to run your business.
- For things you’ve highlighted as Questionable: Decide whether or not you need to purchase these items again. Or, you could find a new supplier for the item that is cheaper.
- For things you’ve highlighted as Not Needed: Immediately remedy the problem. For example, if you’ve found that you are on autopay for a service that you no longer use. Cancel it right then and there! Or, if you’ve recently purchased something you are never going to use, return it or resell it to recoup the money in your business.
It simply isn’t enough to record your expenses as you go. You need to monitor them. You may just find that regular spending audits will kelp you stay laser focused in your spending.
Tip: The more often that you do spending audits, the easier it will get. If you need help with accounting, head to this post.
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