Tracking deductible expenses paid by cash
The question often arises:
I’m using the wallet to enter a number of business expenses that I paid Cash for, but I don’t want to bother with tracking every cent and reconciling with ATMs etc.
This is easy with Cash Wallets. You enter these as Identifiable Expenses.
1. Categorise all cash withdrawals to one or more wallets. Each Wallet is
effectively the sub-register. You know what cash is withdrawn + you can set reporting limits in the Budgets Monitor. You can find the transactions by Search.
2. Categorise the business/job/claimable/tax-related expenses within
wallets. These are “identifiable expenses”
3. Simply “allocate” the rest. You can do this to a single category eg “Cash Withdrawals - uncategorised” or to multiple categories. This allocation allows you to simply split on a percentage basis or nominated cash basis.
For example you may not know exactly where each cent went but you could
nominally allocate a best-guess percentage.
You may be inclined to think that simply allocating the rest on your best-guess will not give you a sensible budget. This is not necessarily correct for the following reasons:
1. It is well known to people who manage complex construction projects, where keeping to budgets is crucial, that informed best-guesses are often incredibly accurate.
In establishing such budgets you generally come unstuck only when you miss an item from your budget. Your informed guess on component costs is usually right - while the individual figures may be above or below actual, the totals invariably are close to the mark.
2. In this case you have an accurately known amount of money which you are trying to split.
In this case there can be no inaccuracy in the total. So, if your budget for Groceries is 5% too high and your budget for Fruit and Vegetables is 5% too low there can be no error overall.
This means budgets built on these allocated actuals accurately predict the totals required in the Cash Commitments module. Budgets based on allocated expenses accurately contribute to predicting your financial wealth/health using the CashCurve (providing you make a budget).
3. Finally, there are simple ways to reduce the amount of guesswork in the allocation. You could, for example, keep receipts for your major cash expenses. These you may enter as Identifiable expenses. With a smaller amount to allocate your overall accuracy increases.
