Expense Report: Meaning, Need, and How to Create an Expense Report?

Employees of a small business will typically incur various business expenses, which are unavoidable as they need to be incurred to run the business, out of their own pockets.

Travel-related expenses, like airfare, travel meals, car rentals, lodging, or other business expenses, like meals, office supplies, or mileage when an employee uses his vehicle for business travel.

Because these expenses are part of business spending, the employees will request expense reimbursements from the business entity. As such, these requests are made by the employees in a document known as the expense report.

In this article, you will learn everything you need to know about expense reports:

What is the Expense Report?

An expense report is a form used to report on expenses that are incurred while running a business.

Expense reports are typically used by employees of a company to report on various out of pocket business expenses. Essentially, it is a form which allows employees to request reimbursement of all the business expenses incurred on behalf of the company.

The employees typically attach receipts for the expenses and this is the amount that gets reimbursed to them. Once submitted by the employee, the business will scrutinise the expense report to check for correctness and validity, if an expense is authorised then the business may then reimburse the amounts listed.

Following the reimbursement, the business can record the reimbursed amount as a business expense that impacts both the accounting profit and the taxable profit of the company.

What Should An Expense Report Include?

As an expense report itemises and breaks down the expenses incurred on behalf of a company, it can include various details that are specific to your business. However, there are some fundamental details that must be included in an expense report, such as:

Date

This is the date when the expense was incurred, and the date listed on the expense report should match the date on the receipt.

Supplier

This is the name of the supplier from which a specific item was purchased or services were used.

Nature

This relates to the type of expense incurred, like meals, air tickets, car rental, etc.

Total Amount

This is the total cost incurred, including taxes, and this amount needs to match the amount specified on the related invoice.

Account

This refers to the account where an expense is to be charged.

Description

This is a brief account of what each of the business expenses were.

Sub-Total For Each Expense

These are the sub-totals for each type of business expense included in the expense report.

6 Steps To Create An Expense Report: A Guide For Small Businesses

When running a business, particularly a small business, you'll likely have employees who will incur out of pocket expenses on behalf of the business. Because of this, it is important that you are keeping track of these expenses, so you're aware of how much your business is spending.

This is why expense reports are useful, as they make it easier to track expenses, so you can determine the amount that your employees will be reimbursed for the expenses incurred by them. It also provides the details of specific expenses so that your small business can apply for tax deductions, as many business expenses are deemed tax-deductible.

Preparing an expense report helps you itemise each expense so your accountant can easily include these expenses in your tax forms. It is important to note that the tax collection agencies in your country will have defined standard expense categories that they use, so you should use these categories in your reports to fast track your taxes.

Follow the these six steps to create an expense report for your small business:

1. Select a Template or Use an Accounting Software

You can choose between a template and an expense tracking software to create an expense report.

So, when creating your expense reports, you can either:

Download the Free Microsoft Excel Expense Report Template

Preparing an expense report from scratch takes a lot of effort, so many businesses will choose to use a template to create their expense report using documents in Excel, PDF, Word, or other platforms.

If you use an Excel template, you can easily enter data in separate columns, and if needed add more columns for additional expense categories. The calculations are fast and accurate as Microsoft Excel will automatically calculate the amounts in their corresponding columns.

The Excel template also comes with specific default business expense categories, making your job easy and can be edited as needed.

Use Expense Tracking Software to Generate Expense Reports

As a small business, preparing expense reports in Microsoft Excel is easy, but as your business grows you may need to shift to an expense tracking software.

This is because you can easily connect your bank account to the software, download transactions, and categorise and add expenses, so you can get time on your side. You can also capture receipt images through third-party app integrations, which are available within the expense tracking software so you can automate the expense report process.

2. Add or Delete Columns

The Microsoft Excel template comes with standard expense categories, which you can edit based on the type of expenses that your business incurs. For example, if you have employees that travel frequently for business needs, you'll need the ‘Travel and Meals’ column.

As a result, expense reports help you itemise expenses by tax categories, fast tracking your taxes as there are certain expense categories on which deductions can be claimed by you as a business.

3. Report Expenses as a Different Line Item

You'll need to report each expense separately in a different line and provide as much detail as possible. Make sure to provide information, like the client for which specific expenses were incurred, so that you can track expenses effectively.

Additionally, you'll need to report expenses in the order they were incurred, with the most recent towards the end. Once all expenses have been reported, add each expense amount including the tax amount.

4. Calculate the Total

Various expense categories will have a subtotal along with the total of all the expenses. Adding subtotals and the grand totals to your expense report will make expense tracking easy so you can see how much money is being spent.

5. Attach Associated Receipts

Expense reports are used by employees who have incurred an expense on the behalf of a business and who wish to be reimbursed. As such, they'll need to provide proof of the incurred expenses by attaching the corresponding receipts.

They can submit a scanned copy or a photocopy of the receipts depending on whether they are submitting reports electronically or in a printed format.

6. Print or Send the Report

Before you print and send the expense report, be sure to check the totals and subtotals listed.

Using expense tracking software will allow you to export the expense reports to Excel and as a PDF so you can send the reports via email.

Expense Report Templates

Expense Report Templates help you track expenses quickly and easily. However, as your business grows, you mat want to shift to an expense tracking software to get time on your side, and as the number of expenses your business incurs increases.

Some Expense Report Templates that you can use to generate expense reports quickly and easily are:

• Free Microsoft Excel Expense Report Template
• Free Microsoft Excel Travel Expense Report Template
• Free Microsoft Excel Mileage Log and Expense Report

Why Do We Need Expense Reports?

There are a variety of reasons that expense reports are needed, including:

Tracking Expenses Over a Reporting Period

Expense reports help you understand how much you are spending as a business with respect to specific expense categories. As a result, you are then able to see if any expense categories are leading to increased costs.

Reimbursing Employees

Employees of a small business will typically incur out of pocket expenses and will need to be reimbursed for those expenses. To do so, you'll need a proper system in place to ensure that the claims are deemed authorised business expenses.

This is why expense reports are useful, as they itemise the expenses, giving you an understanding of when, where, and how these expenses were incurred.

Do Your Taxes Effectively

Many of the business expenses incurred by your employees are tax-deductible. However, you cannot claim the deductions for these until you have a proof of the expense.

With the help of expense reports, you can keep a track of these tax-deductible expenses which may not reflect in your bank account history. This makes it easy for you to claim tax deductions for such business expenses during the tax time.

How To Get Paperless Expense Reports?

More businesses are going paperless, this is due to certain benefits, such as:

• reduced expenses on office supplies
• no added cost of processing physical reports
• saving employees the hassle of submitting physical copies of the expense reports
• no missing receipts

In the digital age of cloud computing, businesses are using automated expense report softwares, like QuickBooks, to generate paperless expense reports. All employees need to do is login to their account and fill in the expense report. They can also capture images of receipts and upload them, removing the risk of losing paper receipts.

In addition to this, businesses can link their bank accounts, categorise expenses, as well as generate and send paperless expense reports quickly.

Simple Expense Report Template

A simple expense report template records the date, time, and a total of each of the expenses. These expenses are reported by item with their totals and the reimbursement amount is calculated at the bottom of the report.

You can make changes to this template by adding new columns for specific expense types, or changing the column headings to categorise expenses.

Monthly Income and Expense Template

As the name suggests, you can use this template to keep tabs on income and expenses month-on-month. This spreadsheet simply reports income and expenses and calculates the total amount for each of them.

You can even customise to report expenses that you want to keep a check on. In addition to this, this spreadsheet makes it really easy to record monthly and annual expenses as each month is a separate spreadsheet.

Expense Sheet Template

The expense sheet template is again a simple spreadsheet that is made to keep a track of business or personal expenses.

It includes details like the payment method, date of payment, the amount paid to, the amount paid, description, and subtotal of each of the expense categories.

Thus, it gives you a clear picture of the purchases made and other expenses incurred. You can use this expense sheet to prepare a monthly expense report or use it for reference purposes.

Event Budget Template

This template provides details on the expenses and revenue sources. It compares the projected figures with the actual amount, giving you a clear picture of the gap between the budgeted versus actual income and expenses.

In addition to this, this sheet also includes a pie chart showcasing the various expenses and expense percentages. These percentages reveal how much of the total budget has been utilised by specific expense types.

Weekly Expense Report Template

Some businesses require their employees to submit their expense reports on a weekly basis. This is done so that the business can keep track of the expenses incurred and reimburse their employees for the same on a regular basis.

This expense sheet reports different expense categories on a day-to-day basis, which you can make changes to as needed. You can even specify the purpose for which expenses have been incurred, the expense types, and the subtotals.

Business Budget Template

This expense sheet records the cost of goods and services so you can keep track of business expenses for your small business, and so you can compare your operating expenses against income.

In addition to that, this template helps you to report on projected versus actual income and expenses so you can plan your budget.

Personal Budget Template

The personal budget template reports personal income, savings, and expenses by item on a monthly basis. It provides a visual representation of your expenses, income, and savings, similar to a dashboard, giving you a clear view of your financial standing.

Balance Sheet Template

With the help of the balance sheet template, you can compare your assets and liabilities and get an overview of your company's financial position, and get useful insights for various stakeholders, such as the investors and creditors.

Travel Expense Report Template

Business that require their employees to frequently go on business trips can use this template to record their travel expenses. This template provides details with respect to business trip expenses, such as lodging, food and meals, and airfares.

It also provides a section where the employees can report any expenses that do not fit into the expense categories specified. You can even include the purpose of the trip, destination, and contact details of both the employer and the employee.

Business Mileage Tracking Sheet

This is an easy-to-use template for businesses that reimburse their employees for mileage costs. It includes details like the date of travel, the purpose of travel, odometer start and end readings, total kilometres, and the reimbursement rate.

You can also include a column for additional comments, like reporting the purpose of travel.

Business Expense Reimbursement Form

This is a simple expense report template used to record the type of expenses, the amount, and the date on which the expenses were incurred. This can be used by employees to request a reimbursement and by the business entity to keep a record of reimbursements being made. You can also customise this sheet to include more columns as needed.

Money Manager Template

A business can use the money manager template to track expenses and plan their budget. It itemises income, expenses, and savings on month by month basis. You can also compare the actual monthly income with the projected monthly income balance and use that when budget planning.

Expense Report Templates for Word

This is a basic expense report template for Word that itemises your expenses, you can even make changes to such a template as needed by your business. You can report certain details, like the date expenses were incurred, the type of expenses, the total amounts, and the employee details.

Discover a Better Way to Manage Expense Reporting and Finance Operations

Expense reporting is a fundamental part of running a business and achieving your financial goals.

A business must undertake expense reporting effectively, because it enables the firm to track its expenses, reimburse employees properly, and gain an understanding of the actual versus budgeted spendings.

Accordingly, businesses need expense tracking software that allows them to do just that, and, with QuickBooks Online Accounting Software, your business will be able to track your income and expenses on-the-go.

Connect your Accounts

QuickBooks enables you to connect your bank accounts, credit cards, Paypal, etc. so you can automatically import transactions into your account.

Sort Expenses

With Quickbooks Online, you can automatically sort expenses into the relevant tax categories, allowing your business to claim the relevant tax deductions.

Organise Expense Receipts

Quickbooks Online helps you to capture receipt images and save them, which get automatically matched to your expenses. By organising receipts in one place, this enables you to never miss a tax deduction.

Create and Send Expense Reports

You can create expense reports in no time while keeping track of your finances with QuickBooks. These expense reports provide you with useful information so you can make key decisions and understand the profits or losses your business is making.

You can even share these reports with your accountants to get a better understanding of the financial standing of your business.