If you are just starting a small business, one of the most important steps is keeping track of your expenses. Expenses can help offset any revenue in the first few years of operating, which can greatly improve your profit margins during those essential early years.
Ensuring your business expense information is accurate and appropriately categorized is essential. Failing to do so may result in inaccurate tax filings and possibly missed expenses that could result in higher reported earnings.
Why Use A Business Expense Report?
A business expense report is used to track and record all the expenses incurred by a business. There are several reasons why a business would need to use an expense report:
By keeping track of business expenses, a business can claim tax deductions on these expenses when filing taxes. This can help reduce the overall tax liability of the business.
An expense report can be used to reimburse employees for expenses incurred on behalf of the company. This helps ensure that employees are compensated accurately and promptly for their expenses.
By tracking expenses over time, a business can identify areas where it can reduce expenses and cut costs. This helps the business to make informed decisions about future spending and improve financial planning.
In some industries, such as healthcare or finance, there are strict regulations governing how expenses can be incurred and recorded. An expense report can help ensure that a business is in compliance with these regulations.
Expense reports can provide valuable insights into a business’s spending patterns. This information can be used to identify trends, make informed decisions about future spending, and improve overall financial performance.
In summary, using a business expense report is important for managing expenses, ensuring compliance, and improving financial planning and performance.
What Should Be Included In A Small Business Expense Report?
A business expense report should include the following information:
- Date: The date on which the expense was incurred.
- Category: The category of the expense, such as travel, meals, entertainment, or office supplies.
- Description: A brief description of the expense, including the purpose of the expense and the people involved.
- Amount: The total amount of the expense, including any taxes, tips, or other fees.
- Payment Method: How the expense was paid, such as by credit card or cash.
- Receipt: A copy of the receipt or invoice for the expense.
- Business Purpose: An explanation of how the expense is related to the business, such as a business trip or a client meeting. Typically these are organized in expense categories that can be easily identified by an accountant.
- Employee Information: The name of the team members who incurred the expense, and any other relevant information, such as their department or job title.
- Approval: The name and signature of the person who approved the expense.
It’s important to note that the specific information required on a business expense report may vary depending on the company’s policies and procedures. It’s always a good idea to check with your company’s finance or accounting department to ensure that you’re following their guidelines.
Can Personal Expenses Be Included In An Expense Report?
No, you should not include personal expenses in a business expense report. Business expenses are expenses that are incurred solely for the purpose of conducting business operations, such as travel expenses, office supplies, or client entertainment. Personal expenses, on the other hand, are expenses that are incurred for personal reasons, such as groceries or clothing.
Including personal expenses in a business expense report is not only inaccurate, but it can also lead to legal and financial consequences for the business and the individual involved. Misrepresenting personal expenses as business expenses can be considered fraud or embezzlement, which are serious offenses.
It’s important to keep personal and business expenses separate to avoid any confusion or legal issues. If you accidentally mix personal and business expenses, you should clearly identify which expenses are personal and which are business-related. It’s best to consult with your company’s finance or accounting department for guidance on how to handle these situations.
Can Payroll Be Included On An Expense Report?
Payroll expenses should never be included on an expense reports. This includes any wages for hourly or salaried employees. Any bonuses, overtimes pay, or other types of compensation should be reported directly to your accountant and left off any expense reports.
What Can You Include On A Business Expense Report?
You can include various types of expenses on a business expense report. Generally, all business-related expenses that are incurred for the purpose of conducting business operations can be included. Here are some common types of expenses that can be included on a business expense report:
- Travel-related expenses, such as plane tickets, hotel stays, car rentals, and mileage reimbursement. If you have an employee that travels frequently, it may be helpful to have them use a separate travel expense report to track their expenses.
- Meals and entertainment expenses related to business meetings, conferences, or client visits.
- Office supplies, such as printer ink, paper, and other supplies needed for day-to-day operations.
- Professional development expenses, such as tuition, conference fees, and membership dues for professional organizations.
- Marketing and advertising expenses, such as print ads, digital ads, and promotional materials.
- Equipment and technology expenses, such as computers, software, and office equipment.
- Rent and utilities expenses for office space, storage space, or other business facilities.
It’s important to note that the specific types of expenses that can be included on a business expense report may vary depending on the company’s policies and procedures. It’s always a good idea to check with your company’s finance or accounting department to ensure that you’re following their guidelines.
Is Expense Report Software Reliable?
There are several online programs and apps that help companies track expenses using a virtual platform. These are typically accurate, convenient, and offer real-time visibility to managers tracking employee expenses. Some platforms can connect directly with company bank accounts and send reports to accountants, making expense reporting very streamlined.
While apps and software can be a quick solution to expense tracking, the total cost of expense-tracking software is typically what prevents small businesses and start ups from being able to use them. Using an expense report form is a good starting point for small business owners who just don’t have room for this type of software in the budget yet.
Use A Simple Expense Report Template
The key to getting accurate information from your employee’s expense reports is making sure you have a monthly expense report template that is simple and straightforward.
If you create a simple spreadsheet using Google sheets, the information can be accessible remotely from any device. Additionally, Google docs offer real-time sharing which means you can track expenses as soon as they are inputted into the report.
Free Expense Report Template
Below is a free downloadable expense report template that can be used for various business purposes. This customizable template includes options to create different expense types for tax purposes. You can use this template for an employee expense report, a budget template, or even as a personal budget tracker for financial goals.
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