How to Write a Business Expense Report (With a Sample)
If you own a small business, sooner or later, you’re going to need to track your company’s everyday expenses as you build your venture from the ground up.
It may seem unnecessary when you’re first starting out, as your smaller capital expenses may appear unsubstantial and have little effect on your business. But the sooner you begin maintaining a business expense report on a regular interval, the less work you have to do during tax season and times when your operating capital is low.
What Is a Business Expense Report?
If the name is any indication, business expense reports seem as if they would track every cent you spend while running your company, but while that us true to some extent, that is not exactly what they are. Expense reports are essentially forms that tally all the money spent on travel, meals, lodging, training, incidentals, and entertainment that an employee or business owner buys out of their own pocket as opposed to using a previously provided per diem.
The form or report is filled out on a regular basis (typically monthly or quarterly), then submitted to the company bookkeeper, accounts payable department, or owner. Once the expenses have been justified with a receipt for the purchase and company approval, the person who filed the report is sent a check for reimbursement of expenses incurred.
Reasons You Need to Use a Business Expense Report
Expense reports may be a tedious chore, but ultimately they serve the company’s best interests in the case of a financial dispute or audit. By filing these reports on a regular basis, you can ensure that you and your employees are budgeting properly for expenses necessary to keep your business financially secure, as well as maintaining company morale and goodwill.
No employee (or business owner) would ever want to use their personal funds to do the job they are hired to do for a salary. So keeping and filing an expense report leaves all parties involved in a better financial situation than allowing such costs to be assumed by the employee or owner instead of by the company.
If you are a solopreneur or if you run a micro business, expense reports can seem foolish, but again, they’re just as important for your company as they are for an employee at a corporation like Apple or Disney. Tracking where you spend your funds to engage in your small business's professional activities are a part of your business’s fiscal control and should be used when filing taxes to accurately account for how much money your company has spent throughout the year.
How to Make an Expense Report That’s Tailored for Your Business
Individual industries may dictate what your small business’s expense report forms need to contain based on what costs are standard for your company to do business. For example, if a number of your employees are in sales, and they are expected to occasionally take potential and established clients out to lunch or dinner, your business’s expense report form should reflect the opportunity for the sales team member to submit a receipt for food and entertainment and the details of the expense easily so that they may be reimbursed for the amount spent wining and dining a client.
Therefore, an entry or code for meals should be standard on your company’s expense report form.
Another example of effectively tailoring your small business's expense reports for your needs is to allow for a code or entry dedicated to training or conference fees. In many industries today, staying on top of new technology, think-tank brainstorming sessions, or certification renewals is necessary to remain competitive. If your company doesn’t regularly account for such events and workshops in the annual budget, then including that option on a customized expense report for reimbursement is a convenient and sensible choice.
Templates or samples of general business expense reports can be found online easily, but every small business is unique and you should attempt to modify any templates to mirror your specific business needs. Sometimes these templates are only in a printed paper format and others are all digital. Either way, remember to make sure all costs requested for reimbursement are supported by an invoice or receipt. This is not only a sound measure for your bookkeeping files, but may also be needed should a tax audit be necessary.
If you’ve never used an expense report before and can’t determine if you want to use a paper form or a online option, start with a paper report until you get in the habit of filling one out before moving to a cloud-based service or digital application.
An example of a basic small business expense report is included below:
This template may be simplistic, but it captures the minimum of what your company’s expense reports should be tracking, and can be easily modified to include more categories or a variety of events. Employees who often travel to conferences, entertain clients, or engage in several training workshops and sessions each year should be able to enter all their information in for the month (or longer) on each form.
If the template above is too rudimentary, a simple online search can reveal a large selection of paper and digital expense report options to choose from. If you’re interested in cloud-based expense report tracking services, companies like Procurify, Zoho Expense and Rydoo offer popular systems that make expense recording simple and intuitive.
How to Take Fiscal Control of Your Small Business
Small business owners would be wise to begin using expense reports as soon as they are able in the process of getting their company off the ground. In addition to providing you with the opportunity to keep track of where your small business's money is going at any given time, they allow you to prepare for tax season and stay ahead of an audit, as well as assures employees they feel valued knowing their company is covering the expenses incurred while they were focused on doing their jobs.
A successful company is one where the fiscal control is firmly secured in the business owner’s hands, and an established business expense report system can help you achieve that.