Typically, employees of a small business incur various business expenses out of their own pockets. These expenses are unavoidable for they need to be incurred to run the business.

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

Since such expenses form part of business spending, the employees request expense reimbursements from the business entity. Accordingly, such requests are made by the employees in a document known as the expense report.

In this article, we will discuss everything you need to know about expense reports. Read ahead or jump to the following sections:

What is an Expense Report?

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

Expense reports are typically used by the employees of a company to report various business expenses incurred by them out of their pockets. Essentially, an expense report is a form through which employees request reimbursement of all the business expenses incurred by them on behalf of the company. The employees typically attach receipts for the expenses and this is the amount that gets reimbursed.

Once submitted by the employee, the business scrutinises the expense report to check for correctness and validity. If the expense is found to be an authorised business expense, the business entity may reimburse the amounts found on the expense report.

Post reimbursement, the business can record the reimbursed amount as business expenses that impact the accounting profit and the taxable profit of the company.

What Should An Expense Report Include?

As stated earlier, an expense report is a document that itemises or breaks down the business expenses incurred by employees on behalf of a company. Further, it requires the employees to attach the receipts associated with such expenses.

An expense report can include various details that are particular to your business. However, various fundamental details must be included in an expense report including:

Date

This is the date on which the expense was incurred. The date on the expense report should match the date on the receipt.

Supplier

This is the name of the Supplier from whom a specific item was purchased or the one whose services were availed.

Nature

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

Total Amount

This is the total cost of an expense incurred including taxes. Such an amount matches the amount specified on the related invoice.

Account

This refers to the account to which such 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.

Why Do Small Businesses Need Expense Reports?

There are a variety of purposes for which expense reports are needed by small businesses. These include:

Tracking Expenses Over a Reporting Period

Expense reports help you to understand how much you are spending as a business entity in respect to specific expense categories. Thus, you are able to see if any particular expense category is leading to increasing your costs.

Reimbursing Employees

As mentioned earlier, the employees associated with small businesses typically incur expenses out of their pocket and will need to be reimbursed.

Thus, you need a proper system in place to ensure that the claims being demanded are authorised business expenses.

This is where the Expense Reports come handy. They itemise the expenses which gives you an understanding of when, where, and on how these expenses were incurred.

Do Your Taxes Effectively

Many expenses incurred by your employees while at work are tax-deductible. However, you cannot claim tax deductions for these expenses until you have proof of the expenses via a receipt.

With the help of expense reports, you can keep track of these tax-deductible expenses which might not reflect in your bank account history. Thus, this makes it easy for you to claim tax deductions for business expenses come tax time.

It is important to note that the apex tax collection agencies of various countries have defined standard expense categories that they use in tax forms. Thus, you should use these expense categories in your expense reports so that you can fast track your taxes.

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

Follow the 6 steps below to create an expense report for your small business.

1. Select a Template or Use an Accounting Software

You can choose between an expense report template or an expense tracking software to create an expense report. To create an expense report, you can either download a free expense report template or create an expense report from scratch.

Download QuickBooks Free Excel Expense Report Template

Preparing an expense report from scratch takes a lot of effort. QuickBooks has you covered with our free excel expense report.

With our excel expense report template you can easily enter data items in designated columns and add more columns for additional expense categories. Further, your calculations will be fast and accurate as our excel template automatically calculates the amount in the appropriate columns.

Download QuickBooks free Excel Expense Report Template

Use Expense Tracking Software to Generate Expense Reports

As a small business entity, preparing expense reports in Microsoft Excel is easy. But as your business grows along with the number of expenses, you may need to shift to an expense tracking software.

Expense tracking software allows you to easily connect your bank account with the expense tracking software, download transactions, categorise and add expenses, and get time on your side. You can also often capture receipt images through third-party app integrations that are available with the expense tracking software. This automates the process of creating an expense report.

2. Add or Delete Columns

As mentioned earlier, the Microsoft Excel expense report template comes with standard expense categories. You can edit these based on the type of expenses that your business entity incurs.

For instance, if your employees travel frequently for business needs, you need the ‘Travel and Meals’ column.

Therefore, expense reports help you to itemise expenses by the tax category. This fast tracks 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

Make sure that you report each expense separately in a different line and provide as much detail as possible.

For instance, provide information such as the client for which specific expenses were incurred so that you can track expenses effectively.

Furthermore, report expenses in the order as they have been incurred with the most recent expense towards the end.

Once all the expenses have been reported, add the amount of each expense including the tax amount.

4. Calculate the Total

As specified earlier, various expense categories have a subtotal as well as the total of all the expenses. Adding subtotals and the grand totals to your Expense Report make expense tracking easy. This is because you can easily see how much money you are spending for each expense category.

5. Attach Associated Receipts

Expense Reports are requests for reimbursement of expenses incurred by employees who are submitting such a report.

Therefore, they need to provide proof of the expenses incurred by them by attaching the receipts of the associated expenses.

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

6. Print or Send the Report

Check the totals and subtotals before you print and send the expense report. Expense tracking software allows you to export the expense reports in Excel and PDF formats and send the reports via email.

Expense Report Templates

Expense Report Templates help you track expenses quickly and easily. However, you may want to shift to expense tracking software once your business grows, and the number of expenses increases.

Download QuickBooks free Excel Expense Report Template and take control of your business expenses.

Different Types of Expense Reports

Simple Expense Report 

A simple Expense Report simply records the date, expense time, and total of each of the expenses. Expenses are reported item-wise with their totals, and the reimbursement amount is calculated at the bottom.

Monthly Income and Expense Report

As the name suggests, you can use monthly expense reports to keep tabs on income and expenses month-on-month. This report simply reports income and expenses each month which makes it easy to record monthly and annual expenses. Each month becomes a separate report.

Event Budget 

Event budgets provide itemised details of both the expenses as well as the revenue sources of an event. You can compare the projected figures with the actual amount, thus giving you a clear picture of the gap between budgeted versus actual income and expenses which can help inform future event planning.

Weekly Expense Report 

There are some business entities that require their employees to submit their expense reports on a weekly basis. This is done so that the business entities keep track of the expenses incurred and reimburse their employees for the same on a regular basis. This works similarly to a monthly expense report but is calculated on a weekly basis.

Travel Expense Report 

The business entities that require their employees to frequently go on business trips can use a travel expense report to understand their travel expenses. These reports should provide details common to business trip expenses like lodging, food and meals, airfare, etc.

Business Mileage Tracking Sheet

A business mileage tracking sheet is used for business entities 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 miles, and the reimbursement rate.

How To Get Paperless Expense Reports?

Businesses are increasingly going paperless. This is due to benefits like:

• 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, etc

In the digital age of cloud computing, businesses are using automated expense report software such as QuickBooks financial reporting software to generate paperless expense reports. All employees need to do is simply login to their account and fill in the expense report. Furthermore, they can capture images of the expense receipts and upload them, thus getting rid of the worry of losing paper receipts.

In addition to this, businesses can link their bank accounts, categorise expenses, and generate and send paperless expense reports within no time.

Discover a Better Way to Manage Expense Reporting and Finance Operations with QuickBooks

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

When done correctly, expense reporting enables businesses to track expenses, reimburse employees, and get an understanding of the actual versus the budgeted spendings. For this reason, it’s important to get it right.

Accordingly, business entities need expense tracking software that allows them to do just that. QuickBooks Online financial reporting software helps your business track your income and expenses on-the-go.

Connect your Accounts

QuickBooks enables you to connect your bank accounts, credit cards, third party payment apps, etc. to automatically import transactions into your QuickBooks account.

Sort Expenses

With Quickbooks Online, you can automatically sort expenses into tax categories. This makes it easier to claim tax deductions.

Organise Expense Receipts

Quickbooks Online also helps you to capture images of receipts and save them. They then get automatically matched with your expenses. Thus, organising receipts in one place enables you to never miss a tax deduction.

Create and Send Expense Reports

You can create expense reports in no time and keep track of your finances. Share these reports with your accountant to get a better understanding of the financial standing of your business.

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