How Do I Keep Track of My Expenses/Income?

The number one reason while small mushroom farms fail is, they don’t treat their farm as a business. They are thinking “as long as I am making money, I am good to go or as long as I have customers, everything is okay.”

That might be correct, but while this is in most of the cases only valid at the beginning of your career as a businessman or woman, it can get you into trouble down the road. The main reason for that is that you don’t have the structures behind your business which support you.

Such a support system is keeping track of your expenses and income sources.

With that said, let’s go.

When it comes to tracking your expenses, we should first distinguish between three different accounts 1) your personal account, 2) your business account, and 3) a savings account.

Within each account, you will have several areas where you will put money (table 1). The first table lists all your income sources and all your expense sources in one place.

Your primary income source will likely be your mushroom farm. If not, adjust the spreadsheet accordingly.

On the other side, you will see all your expenses starting with the rent or loan of your house, your car, the cost for electricity and water and so forth. When it comes to defining what you should list separately or what you could put into miscellaneous, you should think about the overall size of this position in general.

If you put too much into miscellaneous, then it doesn’t make sense because you have no control over where your money is really going. On the other side if you list everything it might be bordering you to list each and every penny. Not that you shouldn’t do that, but as I said earlier start with something which works for you and work from that on.

If you realize that your miscellaneous are growing than sperate all the things in this bucket which you spend the most on.

Table 1: Personal Profit/Loss Statement (Summary)

Table 1: Personal Profit/Loss Statement (Summary)

With this simple summary, we already can learn quite a bit, but that’s something for later. Let’s move on to the business world.

As you can see the overview (table 2) for your business looks pretty like what you just saw in table 1. And that’s a good thing. When it comes to tracking your expenses, it doesn’t need to be fancy. It only has to work for you.

If you are just starting out, then you might have only one source of income for your business, and that is fine. Start with one and work from there. If you try to please too many different customers at once you will work, yourself thin. You will inevitably start struggling, which can lead to failure, and that doesn’t help anybody.

On the expense side, you will have your rent or loan as well as the interest rates. You may have a lease for your car. You will put the salary of yours there as well. To grow your business, you have to tell people about it and therefore spend money on marketing.

If you are running your business professionally, then, likely, you will sooner or later be sitting down with other peoples like your CPA. What you spent on these peoples you put into the bracket “Consulting”.

Then there are the expenses which are necessary actually to run your farm. Electricity, water, gas, substrate, spawn, bags, and so on.

In the end, you will have a sum of your income sources and a sum of your expenses. If you subtract the payments from your income, you will know your profit or loss.

Table 2: Business Profit/Loss Statement (Summary)

Table 2: Business Profit/Loss Statement (Summary)

Both (table 1 and table 2) summaries give you a first idea about where you spend your money. I recommended that you dive a little bit more into the details and start tracking each and every expense every single month (table 3).

Table 3: Business Profit/Loss Statement (monthly).

Table 3: Business Profit/Loss Statement (monthly).

If you do so, then you are not only confronted with the average numbers, but you can easily spot fluctuations of your income and expenses way better (figure 1). You will, for example, learn that your worst month is April ($5,000) and your best month will be July ($15,000). These two different numbers will already tell you something different than the average number of $6,666 per month.

Figure 1: Example of a monthly income chart.

Figure 1: Example of a monthly income chart.

This is especially true if you look at the cumulated profit and loss statement over the whole year (figure 2 and figure 3). While you are making on average each month $6,666, you will lose money during the first six months of the year while being profitable for the last six months of the year.

Knowing this pattern helps you navigate throughout the year. The negative income in the first half of the year won’t be bordering you because you know that in the second half you will earn it back.

Figure 2: Example of a monthly business profit/loss chart (cumulated).

Figure 2: Example of a monthly business profit/loss chart (cumulated).

Figure 3: Example of a monthly business profit/loss (blue: monthly base; cumulated: red: loss, gree: profit).

Figure 3: Example of a monthly business profit/loss (blue: monthly base; cumulated: red: loss, gree: profit).

This profit loss statement is not only valuable for you but also, for example, for your bank. If you talk with your accountant showing him or her how your farm is making money throughout the year, he or she will be way more relaxed if you are spending in the first half of the year more than you are earning[1].

As you see, tracking your numbers is only half of the equation reading and understanding them the other half. If you want to learn more about this topic you check out my article How to Interpret your Profit & Loss Statement. In this article I address all four parts of the P&L statement.

[1] Disclaimer:  I am not a consultant nor accountant nor CPA and I don’t have any relationship with you besides providing you informational and educational content. Please seek out professional help for any financial advice.

2 thoughts on “How Do I Keep Track of My Expenses/Income?

  1. Do you have a downloadable version of the Profit/Loss Statement, preferably google sheets?

    1. Not yet, but I am working on it. I will send you a message.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.