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 an 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.

Why Do Small Businesses Need Expense Reports?

There are a variety of reasons which an expense report is needed by a small business, including:

Tracking Expenses Over a Reporting Period

Expense reports help you understand how much you spend as a business, broken down into specific expense categories, meaning you can see if there are any particular categories which are leading to increased costs.

Reimbursing Employees

Employees associated with a small business will typically incur expenses out of pocket, so will need to be reimbursed. Because of this, you'll need a proper system in place to ensure that the claims put through are authorised business expenses.

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

Do Your Taxes Effectively

Many of the expenses incurred by your employees while at work are tax-deductible. However, tax deductions cannot be claimed for these expenses unless there is proof via a receipt.

By using expense reports, you can keep track of these tax-deductible expenses, making it easier for you to claim tax deductions for business expenses come tax time.

It is important to note that tax collection agencies in each country will have defined standard expense categories that they use in tax forms, meaning you should use these expense categories in your reports to fast track your taxes.

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

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 using an expense report template or expense tracking software to create an expense report.

Download QuickBooks Free Excel Expense Report Template

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

With our Excel expense report template you can easily enter data items in their designated columns and add more columns for additional expense categories. Your calculations will be fast and accurate as our Excel template is set up to automatically calculate amounts in the corresponding columns.

Download QuickBooks Free Excel Expense Report Template

Using an 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.

Expense tracking software allows you to 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 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

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, 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 records the date, time, and total of each expense. Expenses are reported by item with their totals, and the reimbursement amount is calculated at the bottom of the report.

Monthly Income and Expense Report

As the name suggests, you can use monthly expense reports to keep track of income and month-on-month expenses. This report records income and expenses per month, done as seperate monthly reports, making it easier to record monthly and annual expenses.

Event Budget 

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

Weekly Expense Report 

There are some businesses that require their employees to submit expense reports on a weekly basis. This is done so a business can 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 instead calculated on a weekly basis.

Travel Expense Report 

The businesses 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 expense details that are common to business trips, such as lodging, food and meals, and airfares.

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?

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.

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

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

When done correctly, expense reporting enables a business to track expenses, reimburse employees, and gain an understanding of the actual versus budgeted spendings.

For this reason, it’s important to get it right, meaning businesses need expense tracking software that allows them to do just that. And with QuickBooks Online Financial Reporting Software your business will be able track 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 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.

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