Business Expenses: Tracking Them And What To Track

In the midst of interesting times for the US – and in spite of economic volatility across the country – America is seeing an historic increase in entrepreneurship. The number of new business start-ups is at its highest-ever level, with more than 800,000 businesses starting in 2020 alone.

While this represents exciting times for the nation, many of these new businesses are green to the various processes and systems they’ll need to navigate. Expenses are one of them, being significant costs that can impact profits if not handled properly.

What are Business Expenses?

Expenses are payments and charges to you, your employees or your business, that are incurred as a result of the business or for the benefit of the business. Expenses are wide-ranging in nature, from the cost of office supplies to larger business insurance plans and beyond. Many expenses are tax-deductible, whereby they can be accounted for in your business’ tax report and deducted from your total revenue – bringing down your tax liability as a result.

Handling Business Expenses

Tracking expenses can be difficult even for smaller businesses, but is especially so for businesses with a relatively large volume of employees. There are ways in which you can simplify company expenses, streamlining the process to make for easier tracking and calculation at the end of each month. This is beneficial not only to the accuracy of your end-of-year reporting but also your monthly cashflow figures, as you ensure you aren’t overspending or affecting your profits.

While diligent internal expense tracking is vital for accurate financial oversight, the complexities of tax law and the need for precision in financial reporting often necessitate external expertise. Many businesses find that navigating ever-changing regulations and maximizing eligible deductions can be a significant challenge, diverting valuable internal resources. Engaging professionals for Outsourced business tax prep ensures that all filings are accurate, compliant, and optimized to minimize liabilities. This strategic approach allows business owners to focus on core operations, confident that their financial obligations are handled efficiently and effectively, ultimately contributing to greater financial stability and growth.

Many of the logistical issues with employee and executive expenses can be removed by isolating expenses to one bank account or card. For example, cards issued through open banking solutions can help you centralize payments to said solutions, making expense payments easier to track in totality and also by employee. Training is also crucial, to prevent misunderstandings when making payments or declaring expenses.

Key Expenses to Track

1. Travel Costs

One of the main expenses that sales staff and executive employees can expect to find is in the form of business travel. Private travel and daily commutes are not included as an expense, but any trips taken to meet with a supplier, trade partner or client can be expensed and are fully tax-deductible. This is true for short hops across town and costly international flights alike.

2. Entertaining Staff

Keeping staff morale high is its own reward for some expenses. Putting money aside to offer food and drink at staff meetings, or take departments out for congratulatory meals and events, can work wonders for office atmosphere and working relationships. While these do not strictly fall under tax-deductible expenses, they are well worth tracking and can be a useful form of expenditure.

3. Entertaining Clients

Onboarding new clients, and keeping existing ones happy, is crucial to expanding your business and helping you maintain a positive reputation in business circles. Being able to offer clients food and drink during or after a meeting, and being able to cover the expenses of their travel to and from your offices for that meeting can help you appear as a helpful and caring business which will benefit your relationships in the long run.

4. How to Track Expenses

Having a dedicated and well thought out method of tracking your expenses will make them far easier to pay, submit and manage whilst minimising the risk of something going awry with them. Consider opening a separate banking account just for expense money to be stored and expenses to be paid from so that it is easier to collate all information regarding payments should you need to review them.

Conclusion

Train your staff on proper reporting methods of any expenses they should need paying, such as keeping copies of receipts and proof of any booking confirmations. Having one method that everyone uses will make it easier for your financial team to track and pay expenses, as well as ensuring your company is covered and up to date with associated tax payments.