Tracking expenses: Tips for small business owners and employees

A smiling woman holding a cellphone and receipt while sitting at a table with a coffee and open laptop.

Whether you own a business or work in one, accurate tracking of your business expenses is a necessity. If you’re a small business owner, tracking is essential for understanding your financial position, budgeting, forecasting and fulfilling your tax obligations. If you’re an employee, it’s vital to keep your expense tracking accurate and up to date for reimbursement and tax deductions.

Here are some practical tips to help you effectively track your business and job-related expenses.

For everyone

  1. Keep all your receipts. Your receipts are essential for reimbursement and—in the case of a business owner—tax purposes. So, whether it’s lunch with a client, office supplies or a plane ticket to a business conference, keep all your receipts. If you don’t have an expense-tracking app and hate keeping track of paper copies, you can store digital copies on your smartphone by taking photos or using a scanner app.

  2. Categorize your expenses. Group your expenses into categories (e.g., rent, utilities, office supplies, travel, meals). This will make it easier when it’s time to turn in your expenses for reimbursement or to complete tax returns.

  3. Set up a regular review routine. To help you catch any errors before they cause an issue, make it a habit to review your expenses on a regular basis (i.e., weekly or monthly).

  4. Understand tax-deductible expenses. Knowing what can and can’t be deducted is key to maximizing tax benefits. Especially if you’re a business owner, it’s a good idea to consult a tax professional to be sure you’re taking advantage of all available deductions.

  5. Separate business and personal expenses. If possible, use a separate credit card or bank account for your business-related expenses to minimize confusion at tax time. If you can’t use a separate account, make sure to clearly mark and categorize work expenses in your records.

For small business owners

  1. Use accounting software. QuickBooks®, Xero and FreshBooks are just a few of the accounting tools designed to make tracking expenses easier. They can connect to your bank account, categorize expenses and provide insights into your spending.

  2. Use mobile expense tracking. Mobile expense tracking apps that allow you to input expenses and capture receipt images quickly and easily are a great way to record and organize expenses—especially if you’re constantly on the go.

  3. Implement an expense policy. If you have employees, create a clear policy that outlines how expenses should be recorded and which expenses are acceptable.

  4. Consider hiring a professional. Has your business grown to the point where tracking expenses has become too complex? You may want to think about hiring an accountant or a bookkeeper.

  5. Stay alert. Keep an eye out for anomalies and inconsistencies. Unusual expenses could be a sign of errors or fraudulent activities.

For employees

  1. Understand your company’s policy. Take time to familiarize yourself with your company’s expense policy, so you know what can be reimbursed as well as the process for submitting expenses.

  2. Record expenses as they happen. It’s easy to forget about an expense if you don’t record it immediately. Make a habit of logging your expenses as soon as they occur.

  3. Provide detailed descriptions. For every expense, include detailed notes explaining the business purposes. Some people prefer to jot the information directly on the receipt if there’s room. This information can be essential for both reimbursement and tax purposes.

  4. Keep receipts for the appropriate length of time. Depending on your location and situation, you may need to retain your expense records for a specific period of time. Check with your tax preparer to see what you should keep...and for how long.

  5. Consider tools for travel. If you frequently travel for work, look for apps and tools designed specifically to manage travel expenses like mileage, accommodations or per diems.

By keeping detailed, organized records on the go, you’ll be ready when it’s time to submit your expenses for reimbursement or file your tax return. And you’ll be able to relax, knowing that you’ve put in the work upfront to make the process of tracking business or job-related expenses more efficient and stress-free.