Business expenses are necessary costs incurred by a company to operate and generate revenue. These expenses include various expenditures, such as, but not limited to: operating expenses, cost of goods sold, taxes, employee benefits, marketing and advertising expenses, legal and professional services, maintenance and repairs, and miscellaneous expenses.
Proper accounting and record-keeping of business expenses are essential for financial management, tax reporting and compliance with applicable laws and regulations.
Business expenses broadly fall under five primary categories:
To maximise your profitability, you need to know where your money comes from and how you spend it. Categorising your expenses allows you to make critical business decisions regarding matters such as investments or tax planning. It also helps you with accurate financial reporting, budgeting and forecasting, tax compliance, financial analysis and expense management, allowing you to make data-driven decisions to improve profitability and operational efficiency.
You can use several different methods to track your expenses, from manual processes to sophisticated expense management systems.
In addition to the different methods you can use to keep track of your expenses, here are some helpful tips to guide you:
Keep your business and personal expenses separate, from the very beginning, to avoid confusion over whether a cost was for business or personal reasons. Set up a separate business credit card, a checking account, and a savings account, and properly categorise your expenses so that you know what actually counts as a business expense.
Remember that business expenses may be tax deductible. If you need clarification on whether an item should be considered a valid business expense, ask for professional advice from your accountant or a tax attorney.
Record any transaction as soon as possible. Whether you're making an online purchase, using a check to pay a bill or using cash at a restaurant for a business lunch.
Save every receipt you get in a designated place, such as a file organiser, or save them using an EMS's receipt capture feature so you can always refer to them if you have a question, need a reference or need to submit a claim..
Develop a simple, transparent and standardised method for tracking business expenses, including using expense categories, a system for recording transactions and saving receipts. Sometimes it's not the actual spending that needs to be curbed for improved business performance—just the processes around it. It's no wonder a CFO's role has evolved over the years, and digital transformation has become a priority to streamline these processes and allow for better and more efficient business operations.
With a simple and organised process, you and your employees can divert the hours per week previously spent filing and re-filing expense reports to more critical business tasks. This efficiency and simplicity will yield greater short and long-term returns.
In 2020, a McKinsey and Co. survey showed that 66% of businesses had piloted automation in their business processes. This number will only grow as global digital transformation (DX) spending is projected to reach 2.7 trillion AUD this year and 4.2 trillion AUD by 2025. Additionally, since COVID, this projection is rapidly accelerating!
With 97% of organisations believing that automation is crucial for digital transformation, using automated systems like an EMS is highly beneficial. With an EMS, you can efficiently and effectively track expenses by streamlining processes through the following features:
With real-time visibility into expenses, your business reduces manual efforts, minimises errors, and ensures compliance with expense policies.
Communicate and train employees on your business's expense policies, including what expenses are allowed, what documentation is required, and the process for reimbursement.
Educating your employees on expense policies is crucial for maintaining transparency, accountability, and compliance in your business's expense management process. You can avoid misunderstandings and potential violations by providing clear guidelines on allowed expenses, required documentation, and the reimbursement process.
Informed employees are more likely to follow expense policies, reducing the risk of unauthorised or fraudulent costs and ensuring that expenses align with your business's financial goals and budget.
ProSpend (formerly expensemanager) is your all-in-one platform for managing expenses, supplier invoices, purchase orders and travel spending—all with complete budget visibility.
Our intuitively designed, cloud-based, modular platform is designed for organisations that want to proactively manage business spend whilst automating and streamlining their processes.
We have an array of products that will suit your every business need, from eInvoicing and virtual cards to an accounts payable system and travel manager.
Our expense management solution allows your organisation to benefit from the speed, simplicity, efficiency and accuracy of an automated expense claim and reimbursement process. It has daily feeds for corporate, personal and business cards, automatic coding and matching of receipts, a split feature, configurable Fringe Benefit Tax (FBT) and tax wizards, approval workflows and receipt exceptions.
Our proven methodology ensures a successful and stress-free implementation process. You'll have a tailored expense manager ready in just seven phases. Our personalised implementation and user onboarding program trains staff quickly and ensures they can use our expense manager solution confidently.
Effective management of business expenses is crucial for financial success. By promptly recording transactions, saving receipts, and utilising an expense management system like ProSpend, businesses can streamline their expense tracking process, ensure accurate financial records, minimise errors, and save time.
Schedule a demo with us, and we'll assist you in finding a tailored business expense solution that suits your needs.