Why You Need an Expense Report
As a business owner or manager, it’s vital to keep close tabs on all your business expenses. This is an important aspect of tracking cash flow in the business. There are other good reasons for keeping a close eye on expenses, such as:
Reimbursing Employees for their Out-of-Pocket Expenses
Business owners may ask employees to pay for expenses personally while travelling for the company. The employee may use their personal credit card to pay for expenses like meals, parking, and overnight accommodation. The employee may also pay for office supplies they use to perform their work, including pens, file folders, and Post-it notes.
The employee must complete an expense report and submit it to the finance department to be reimbursed for these costs. Completing a formal expense report streamlines the process and allows employees to have their work-related expenses approved more quickly. Employees receive repayment for out-of-pocket expenses faster as a result.
Budgeting and Forecasting
A business also needs to compile expense reports for budgeting and forecasting purposes. If your team members are working on several projects simultaneously, the expense report allows the project manager to analyse the spending for each one. The data can then be used to make decisions for similar projects.
Project managers can find areas that can benefit from larger portions of the budget. There may be other areas where the budget was quite generous, and the project manager may recommend scaling back.
Income Taxes and the Expense Report
There is another compelling reason for keeping a close eye on business expenses. Most of them can be written off as income tax deductions.
These income tax write-offs make a big difference in the amount of tax the company pays. Every dollar counts since the total amount of business expenses and other deductions could reduce the business’ net income enough to put it into a lower income tax bracket. The difference could mean significant savings in income tax dollars.
Steps Involved in Creating an Expense Report
1. Choose a template or accounting software for your expenses.
There are several accounting software options to choose from that will help you keep track of your business expenses. If you want to keep things simple or if your company is on a strict budget, opt for an Excel sheet or a template. The best option is the one that suits your business needs best.
2. Customise the template or columns to suit.
Once you have selected a template or accounting software for your expenses, it’s time to customise your choice based on your company’s specific needs. Start with the basics, such as the date the expense was incurred, the vendor’s name, and the amount. From there, you can add expense categories specific to your type of business. Some specific ones you may want to add are:
- Advertising
- Automotive Expenses
- Employee Benefit Programs
- Insurance
- Internet
- Meals and Travel
- Mortgage
- Office Supplies
- Rent
- Solicitors’ Fees
- Telephone
- Utilities
- Wages
3. Report each expense.
Once each type of expense has its own category, the next step is to input each transaction. The expenses should be input in chronological order. Accounting software can sort transactions (starting with the older ones and ending with the most recent purchases) once they have been input into your computer.
Input each expense on one line. The details for each purchase should be completed as thoroughly as possible. This data is crucial since managers will use it to make business decisions in the future. Details such as the client and project’s name make it easier to track income v. expenses for the business.
Attaching receipts (in electronic form) to the spreadsheet or the “page” devoted to that month’s expenses in the accounting software is a good company policy. Your team will be able to locate the receipts required to confirm the expenses when preparing your income tax forms.
4. Calculate the total amount of the expenses.
Once all of the expenses have been reported, add up the final total. Many expense reports require you to add subtotals for various subcategories. Add the subtotals for each category and double-check the total amount. Once you have determined the expense amount figure is correct, share it with the finance department manager and any other manager who requests it.
Mooncard Expense Card Makes Tracking Expenses Easy
When your employees are preparing their expense reports, they will want to include their receipts for any money they have spent while travelling on business. Mooncard’s Visa expense card makes this an easy and convenient process.
Each time the company credit card is used, the software records a copy of the receipt. Your employees don’t have to keep track of paper receipts; an electronic record is captured every time. This record is available when employees complete their expense reports for reimbursement.
Would you like to learn more about Mooncard’s Visa corporate card? Click here to arrange an online demo.