If your employees make business expenses—when travelling for a conference, entertaining clients, or using their personal vehicle for work, for example—you need to track those expenses using an expense report.
An expense report will usually ask you to itemize (break down into as much detail as possible) all of the expenses included on the report, and to attach any receipts associated with those expenses. It will also usually organize each expense by category, so that it’s easy to plug into your company’s bookkeeping system.
What should an expense report include?
At minimum, an expense report should include all of the following information:
- Information identifying the person submitting the report (department, position, contact info, SSN, etc.)
- A date and dollar amount for each expense, matching the date and dollar amount on the receipt provided for that expense
- A brief description of each expense
- Which account in your company’s chart of accounts the expense will be billed to
Most expense reports also contain information like:
- Subtotals for each expense type, to make it easier for a bookkeeper to input that data into your accounting system
- The total reimbursement figure being requested by the employee submitting the report
- Room to explain certain expenditures that don’t fit clearly into one category
Expense report templates
Google “expense report” and you’ll find an endless variety of templates, all of which seem slightly different. Which one is right for you?
We’ve come up with three templates that we think should cover most use cases.
A one-time expense report
If your employees don’t make many regular business expenses and you just need a form to capture the odd travel or project expense, a simple one-time expense report might work.
This form is dead simple. In addition to the employee’s personal information and the relevant pay period for which the report is being submitted, all it asks for is a one-line description of each business expense. Each line asks for the date the expense was made, a brief description of the expense, the expense type and the expense amount. Pretty straightforward!
A recurring expense report
If your employees continuously make lots of business expenses over the course of their work (i.e. frequent travel, regular driving, etc.), giving every single individual expense its own line on the report might take up too much room. You might be better off using the following template, which combines all of the expenses you make in one day on one line.
This template provides room for “Hotel,” “Transport,” “Fuel,” “Meals,” “Phone,” “Entertainment” and “Miscellaneous” expenses, although you should customize these labels to fit a typical day of spending for your business. If your employees spend a lot of money on airfare or supplies, those each might deserve their own column in the form.
A long-term (quarterly or yearly) expense report
Companies use quarterly and yearly expense reports to get a snapshot of long-term spending for a particular individual, project, department or product line.
This template is similar to the template above, except for one difference: each month now gets its own row. To complete this form, you’ll have to come up with monthly totals for each spending category.
Why do we need expense reports?
If you run a small business that already does bookkeeping and produces financial statements, it might not be clear why you need expense reports. So why do it?
They let you reimburse employees properly
If an employee pays for something out of pocket and asks for a reimbursement, you need some way of making sure the expenses they’re claiming are accurate. An itemized expense report (with receipts attached) lets you do exactly that.
They let you track expenses over time
Expense reports also let you track spending over time and see whether any particular expense category is driving costs.
They let you do your taxes properly
Many of the expenses your employees make when working for your business are deductible, but you can’t deduct those expenses until you record them somewhere and have proof that they happened.
Generating an expense report helps you keep track of deductible expenses that your business bank account/credit card history might not be catching, and make it a whole lot easier to write those expenses off around tax time.
This is also why it helps to use the IRS’s categories when designing your expense reports.
For example, if you run a sole proprietorship and you use Schedule C (Form 1040) to record your business expenses, make sure to use the expense categories from Schedule C (which you can find in Part II of the form) on your expense reports.
When recording expenses or designing your own reports, make sure to use IRS terminology like:
- Car and truck expenses
- Commissions and fees
- Contract labor
- Legal and professional services
- Office expense
- Rent or lease
- Vehicles, machinery, and equipment
- Repairs and maintenance
- Travel and meals
- Deductible meals
Use a bookkeeping service like Bench to stay on top of expenses
Although filing expense reports will get you part way there, staying on top of your business expenses is a year-long struggle. Thankfully, a bookkeeping service like Bench can help.
In addition to running America’s largest bookkeeping service for small businesses, Bench also offers a full suite of expense tracking tools, including a dashboard that lets you monitor your finances in real-time. If you’ve got a pile of expense reports sitting around and have no idea what to do with them next, our bookkeepers can help.