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Staying on top of your expenses can be one of the most tedious parts of running a business, but you’ll be grateful you did when it comes time to balance the books. Here’s how to write an accurate expense report to make your life easier down the line.
In the most basic sense, any asset that costs your company money is an expense. So, expenses are ordinary and necessary costs (in the sense that they are common for the industry and necessary to the success of the business). These expenses are also tax-deductible. Some types of expenses may be fully or partially deductible. Either way, a smaller tax bill is a welcome addition to your bottom line.
Deductible expenses can include:
Expense report template
The quickest way to create an expense report is to use a template. You can write an expense report in several programs and formats, including Microsoft Word and Excel. If you use Excel, you may hear the term “expense sheet” used instead, but an expense report and expense sheet are the same thing. Regardless of your chosen format, or the template you use, you want to make sure your basic report includes the following:
Your company name
The date range of the report
Date of the item being expensed
Where the item was bought
Cost of the item
Client and project the item is related to
Who purchased the item
Explanation of why it was purchased
Total cost for all items in the report
Depending on what your expense report form is for, you may want to add extra columns, i.e., if you’re expensing a vehicle, add a column for mileage. Items should be expensed within 30 days of purchase, and an expense report can include all expenses for that period, although you may want a separate report for detailed claims such as travel.
Depending on your business habits, you might also want to adapt your expense report template to allow for greater detail in certain areas. For example, if you often take clients out for meals, then you might want more detail than “meal – $50” on your report. The IRS will appreciate deeper explanations such as “Meal with client A to discuss stocking product X.”
Using expense software
The prospect of expenses should be top of mind when you’re selecting accounting software. Most options will include an expense feature, which can make expenses far easier to deal with. Software allows each employee to upload their own expense details, including receipts, into an expense report form. They’ll then be automatically made into a report. This allows for far easier, more accurate tracked expense reports, and because everyone fills in the expense report form themselves, you don’t need to chase to get item details.
Are travel expenses deductible?
Some expenses have to follow certain rules in order to be deductible. This is true of travel expenses. Travelling for business can be costly, so saving on tax can make a big difference. Just some of the rules surrounding travel expenses include:
You must be able to prove that you cannot make the trip without needing to sleep or rest (this doesn’t necessarily mean you have to have an overnight stay)
Your trip is away from the general area of your tax base
Your trip must be for business purposes
All costs must be made by employees of the business (a spouse or other travel companion cannot have their expenses deducted)
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