For many business owners, it’s easy to know where the money is coming in from but harder to track how it’s spent. Expenses can come in all shapes and sizes, from recurring subscriptions to one-time purchases to payroll to taxes.
Often, neglecting to take stock of your expenses can lead to overspending. This is why smart categorization of your expenses can improve the health of your business. Seeing at-a-glance which category is leading to your highest expense can help you diagnose inefficiencies, thereby cutting unnecessary expenses and improving your overall profitability.
Another benefit of categorizing your expenses is to create and maintain accurate Profit & Loss Statements, Balance Sheets, and many other financial reports. By keeping all expenses categorized accurately throughout the fiscal year, these reports will be kept up to date and useful at a moment’s notice to send to lenders or as a financial health checkup.
Sunrise makes categorizing your business expenses easy in two ways:
By providing a simple interface to categorize each expense; and
By applying a learning algorithm that will automatically categorize expenses for you.
As you categorize expenses, Sunrise will learn from your selections and eventually take care of it for you. Let’s see how this works.
Once you have categorized a particular expense, it will disappear from the Unmatched view and show up in either the All or Matched view.
Out of the box, Sunrise can already automatically use keywords to put common expenses into many default categories (Schedule C). For example, Sunrise will read a keyword like “Parking” and auto-categorize this expense under “Automobile & Transit.”
Whenever an expense is auto-categorized, the left-hand color bar will appear as a yellow-red gradient as shown in the example above. If you agree with the category, click the green Match to XXXX button on that line item to approve it.
Besides the out-of-the-box auto-categories, Sunrise will apply its learning algorithm as you manually categorize your expenses. After you categorize a similar expense 2−3 times, Sunrise will learn and auto-categorize similar expenses moving forward.
If you disagree with any auto-categorization of a particular expense, you can either click Edit, which will bring up the pop-down menu so you can change the Vendor, Expense Account, or Description; or click Cancel to remove the matching altogether in order to start over.
Editing or canceling the auto-categorization also teaches the algorithm to improve the accuracy of matching similar expenses in the future.
Eventually, almost all of your frequent business expenses will be automatically categorized by Sunrise’s learning algorithm. This can save you hours of time each month, and also help you keep on top of matching your expenses throughout each day.
Note: Free users of Sunrise are limited to 5 auto-categories. Full expense automation is available in SunrisePlus.