QuickBooks Blog
Person reviewing a receipt for expense tracking
Expenses

Expense tracking: Why, how, and solutions for 2025


What is expense tracking? Expense tracking is the process of systematically recording and categorizing all business-related expenditures. This involves documenting every purchase, payment, and financial transaction in your business. It allows you to monitor where your money is going, identify areas for improvement, and maintain accurate records for tax purposes.


Did you lose a week of billable hours last tax season because you spent time sorting through all your credit card charges and paper receipts to figure out how many of your purchases were expenses? If so, it’s time to implement a system for tracking your business expenses in real time.

In fact, the QuickBooks Entrepreneurship in 2025 report shows that 29% of businesses are implementing strategies to cut expenses to offset price increases. 

It's essential to have a firm grasp on your cash flow, know what’s tax deductible, and understand your quarterly spending. This financial clarity translates directly into a more positive and less stressful experience at tax time.

Here are a few ideas that will help you build a better system for tracking expenses:

Types of expenses businesses should track

When tracking expenses for your business, it's important to understand that they aren’t all created equal. They can be broadly categorized based on their nature and purpose. Recognizing these distinctions is crucial for accurate record-keeping, informed financial decision-making, and maximizing tax deductions.

  • Cost of goods sold (COGS): These are the direct costs of producing the goods or services your business sells. COGS is a critical component of your business's profitability and is often a significant expense category.
  • Operating expenses: Necessary expenses incurred in the day-to-day operations of your business; not directly tied to the production of goods or services. 
  • Capital expenses: Capital expenses are typically significant investments. Instead of fully deducting them in the year they are incurred, they depreciate over time.
  • Taxes: Taxes are an unavoidable expense for most businesses. It's essential to track your tax liabilities throughout the year to ensure compliance and avoid penalties.
  • Interest paid: If your business has outstanding loans or uses credit cards, you'll incur interest expenses. Tracking interest payments is crucial for managing your debt and understanding your overall financial obligations.
  • Depreciation and amortization: These are noncash expenses that reflect the decline in the value of your assets over time. Depreciation applies to tangible assets (like equipment), while amortization applies to intangible assets (like patents or copyrights).

Finally, there might be some expenses that don't fit neatly into the other categories. 

This could be things like: 

  • Bank fees
  • Legal and accounting fees
  • Licenses and permits
  • Charitable contributions

It's important to track these miscellaneous expenses to maintain a complete picture of your business's financial activity.

Chart showing examples of different types of business expenses

Categorizing your business expenses

Effectively categorizing your expenses allows for deeper financial analysis and more informed decision-making. Here are some key ways to categorize your spending:

Fixed vs. variable expenses

Understanding the distinction between fixed and variable expenses is crucial for budgeting and forecasting.

  • Fixed expenses: These remain relatively constant over time, regardless of your business's sales volume. Examples include rent, insurance premiums, and loan payments.
  • Variable expenses: These fluctuate based on your business activity. Examples include raw materials, sales commissions, and shipping costs.

Essential vs. flexible spending

Differentiating between essential and flexible spending helps you prioritize resources and identify areas for potential cost reduction.

  • Essential spending: These are necessary expenses required to keep your business operational. Examples include utilities, payroll, and essential software subscriptions.
  • Flexible spending: These are discretionary expenses that can be adjusted based on your business's financial situation. Examples include marketing campaigns, travel, and entertainment.

By project or time period

Categorizing expenses by project or time period provides valuable insights into the profitability of specific initiatives and helps you track spending trends.

  • By project: This method allows you to track the costs associated with individual projects or client engagements.
  • By time period: This approach enables you to analyze spending patterns over specific periods, such as monthly, quarterly, or annually.
An image of why businesses should track expenses, including maximizing tax deductions and getting insights on spending patterns.

Why small businesses should track expenses 

Expense tracking might seem like a tedious task, but it's absolutely crucial for the financial health and success of any small business. Here are some benefits:

  • Maximize tax deductions: Identify and claim all eligible tax deductions, which can significantly reduce your tax liability and free up valuable cash flow for your business.
  • Gain insights into spending patterns: Identify areas where you might be overspending and make informed decisions about how to allocate resources more effectively.
  • Improve cash flow management: Monitor your cash flow and anticipate future expenses to make better financial decisions, avoid cash shortages, and ensure you have the funds to cover your obligations.
  • Facilitate financial planning and budgeting: A comprehensive record of your expenses lets you create realistic budgets and financial forecasts. This helps you set financial goals, track your progress, and make informed decisions about the future of your business.
  • Prepare for audits and financial reviews: In the event of an audit or financial review, having well-organized expense records is essential. It demonstrates transparency and compliance, making the process smoother and less stressful.
  • Support informed decision-making: You’ll have access to valuable data that can inform various business decisions. For example, you can analyze expenses to determine the profitability of different products or services, evaluate the effectiveness of marketing campaigns, or assess the need for cost-cutting measures.

note icon To maintain an accurate picture of your business's financial health, don't overlook the small stuff. Even seemingly insignificant expenses like bank fees or office supplies can add up over time.


How to track expenses

Effectively tracking expenses involves creating a process for capturing, organizing, and categorizing every business-related expenditure. You can do this through methods like manual record-keeping or utilizing sophisticated accounting software. The key is to find a system that suits your business needs and ensures accurate and consistent tracking.

1. Create a business bank account

If you’re a sole proprietor with a brand-new business, it may not have occurred to you to separate your business and personal finances. If that’s the case, here’s how you can take care of this. Put all of your business income directly into a business account, and use a business credit or checking account for any business-related purchases that can be paid by card.

You can move money from one account to the other as necessary, but drawing a clear line between your business and personal accounts will help you keep track of whether you’re making business or personal purchases. Creating a business bank account will also build up your business’s credit should you need financing in the future.

As a bonus, having a business credit card makes it especially easy to track business spending. You’ll only use this card for business purchases, so figuring out your business expenses will be a no-brainer. This comes in particularly handy during tax season.

You can connect QuickBooks to your bank accounts, credit cards, PayPal, Square, and more, and we’ll import and categorize your expenses for you. Custom rules help you categorize your expenses, and you can run reports to see how you spend every dollar.

Move, manage, and grow your money

No matter what stage your business is in, QuickBooks can help you manage your business finances.

2. Digitize and organize receipts

When you get receipts for business-related purchases, organize them in a file by month, or request email copies of receipts and store them in digital files on your computer. (Whatever you do, try not to store them in a shoe box. Your accountant will thank you for it.)

If you’re ever audited, you may need your receipts as evidence of your business purchases. Storing your receipts will also help you keep track of how much money you’ve spent, making it easier to track expenses throughout the year.

With receipt capture in QuickBooks, you can take photos of receipts with our mobile app and we’ll automatically match all your receipt information to an existing transaction.


note icon Use the QuickBooks mobile app to capture receipts on the go. The app automatically matches the receipt data to existing transactions, eliminating manual entry.


3. Take special note of all business travel

It’s easy to overlook certain travel expenses beyond a plane ticket and hotel room. A big part of expense management is tracking every single detail of any business trip. That dinner outing you had with a client? A business expense. The car you had to rent? A business expense. That one-of-a-kind souvenir you just couldn’t pass up? Okay, that one’s coming out of your pocket.



4. Note your expenses as they occur

Real-time, automated expense tracking is the simplest way to keep on top of recording expenses. QuickBooks can streamline this process with its expense-tracking tools.

If you need a manual method, use a tool like Google Calendar and set up notifications for recurring or one-time expenses. Use the event form to write down the type of expense (i.e., utilities, rent, contractor services) and the recipient of the funds.

You can set up alerts to remind you to pay upcoming expenses before they’re due, and you’ll be able to print out the entire calendar for reference when the next tax season comes around. These reminders can also help prevent missed payments and keep your spending habits front and center.

Many online calendars like Google Calendar can also sync with your cell phone, so you can conveniently enter your expenses while you’re out and about.


note icon Link your business credit card or bank account directly to your expense tracking software. This allows for automatic transaction imports, reducing manual entry and the risk of errors.


5. Use software to track and analyze business purchases

Accounting software like QuickBooks provides options to create expense categories and link them to line items on your tax forms, which will help reduce the time you spend preparing your tax returns. Sign up for your free QuickBooks Online trial to see if it’s the right accounting software for your business. You may also explore our accounting software comparison pages, like this page about QuickBooks vs. Xero.

Accounting software can also be used to generate profit-and-loss statements so you can easily assess the financial health of your business. Using software to track business expenses will save you a lot of time when tax time rolls around in April.

The Cash Flow Planner in QuickBooks can also help you calculate monthly expenses, track working capital, and create cash flow projections. With a free QuickBooks Checking bank account, you can set up budget Envelopes to help you save toward specific expenses, like payroll or operating costs.

6. Hire a bookkeeper

Is your company growing, and you need help tracking all your expenses? Or you just don’t have the knack for numbers? You should consider hiring a bookkeeper on a contract basis. They can spend a few hours each month going through your receipts and invoices and tracking them in accounting software.

While hiring a bookkeeper is another expense, it may even help you save money in the end because you’ll only be able to make small business deductions if you keep proper records. And who keeps better records than a professional bookkeeper?

Run your business with confidence

Get help and guidance when you need it from real QuickBooks experts.*

Track your expenses efficiently—and accurately

Tracking expenses can be a ton of work, but it’s a given for small businesses. But here’s the best part. Doing it the right way is really worth the trouble in the long run. Come tax time, you’ll be so relaxed knowing your receipts are organized and your monthly expenses are in tip-top shape.

QuickBooks Online can simplify your expense tracking with features like automated categorization, receipt capture, and bank reconciliation. This means less manual entry, fewer errors, and more time to focus on what you love—growing your business.


Recommended for you

Mail icon
Get the latest to your inbox
No Thanks

Get the latest to your inbox

Relevant resources to help start, run, and grow your business.

By clicking “Submit,” you agree to permit Intuit to contact you regarding QuickBooks and have read and acknowledge our Privacy Statement.

Thanks for subscribing.

Fresh business resources are headed your way!

Looking for something else?

QuickBooks

From big jobs to small tasks, we've got your business covered.

Firm of the Future

Topical articles and news from top pros and Intuit product experts.

QuickBooks Support

Get help with QuickBooks. Find articles, video tutorials, and more.