How to Master Expense Tracking for Your Business

By Ashley FerroMay 14, 2024

Tracking business expenses is important, but it can feel overwhelming.  

Manual methods are time-consuming, prone to errors, and hard to manage as your business grows.

Think about all the hours spent sorting through expense receipts and manually entering data, only to find mistakes that need fixing. This inefficient process drains resources and delays the financial insights you need for smart decision-making. 

Let’s explore how you can simplify your expense tracking and boost your business's financial health. 

What is Business Expense Tracking & Why is it Important? 

Expense tracking refers to the process of recording and managing all the costs incurred in running a business. This includes everything from office supplies and travel expenses to client dinners and software subscriptions.

An effective business expense tracker app helps businesses stay organised and ensures that no expense goes unaccounted for. 

What Counts as a Business Expense for Tax Purposes? 

Not all expenses are tax-deductible, so knowing which costs you can claim helps you maximise your deductions and minimise your tax bill. 

What Counts as a Business Expense for Tax PurposesHere is a detailed list of common tax-deductible business expenses: 

  • Office supplies & equipment: This includes items like paper, pens, computers, and printers. Anything you need to run your office can typically be deducted. 

  • Rent or mortgage payments: If you rent office space or have a mortgage on a business property, these payments are deductible. 

  • Utilities: Expenses for electricity, water, heating, and internet services used for business operations can be deducted. 

  • Employee salaries & benefits: Wages, bonuses, and employee benefits such as health insurance and retirement contributions are all deductible business expenses. 

  • Travel expenses: Costs related to business travel, including airfare, hotel stays, and meals, can be deducted. Keep detailed records with a business travel solution to support these claims. 

  • Marketing & advertising: Money spent on advertising, marketing materials, and online promotions is deductible. 

  • Professional services: Fees paid to lawyers, accountants, consultants, and other professionals who provide business-related services can be deducted. 

  • Insurance premiums: Business insurance policies, including liability, property, and health insurance for employees, are deductible. 

  • Training & education: Costs for courses, workshops, and seminars that enhance your business skills are deductible. 

  • Depreciation: You can deduct the depreciation of business assets such as machinery, vehicles, and office equipment over their useful life. 

  • Vehicle expenses: If you use a vehicle for business purposes, you can deduct expenses such as gas, maintenance, and insurance. Be sure to keep a mileage log. 

  • Supplies: Any other supplies used in your business operations, like cleaning products or software subscriptions, can be deducted. 

  • Home office: If you work from home, you may be able to deduct a portion of your home expenses, such as mortgage interest, utilities, and home repairs, based on the square footage used for business. 

Why is Expense Tracking Important for Businesses? 

Why is Expense Tracking Important for Businesses

  1. Financial organisation: Keeping track of your business expenses ensures that you always know where your money is going. This organisation helps prevent overspending and allows you to allocate resources more effectively. 

  2. Tax compliance: One of the most important reasons to track your business expenses is for tax purposes. Accurate records make it easier to claim deductions and avoid penalties during tax season. By using an expenses tracker, you can easily categorise and document all deductible expenses, simplifying the process of filing taxes. 

  3. Budget management: Regularly reviewing your business expenses helps you create and stick to a budget. This practice not only helps you control costs but also highlights areas where you can cut back and save money. 

  4. Financial analysis: Detailed expense tracking provides valuable insights into employee spending patterns. By analysing this data, you can make informed decisions about future investments and identify opportunities for scaling growth. 

  5. Cash flow management: Monitoring your expenses helps you manage your cash flow more effectively. Understanding your outflows enables you to plan for future expenses and ensure that you always have enough funds to cover your operational costs. 

  6. Fraud prevention: Consistent and thorough expense tracking can help you detect any irregularities or reimbursement fraud early on. This vigilance protects your business from potential financial losses. 

9 Signs Your Expense Tracking System Needs an Upgrade 

9 Signs Your Expense Tracking System Needs an UpgradeIf you're questioning the efficiency of your current expense tracking system, here are some key signs that indicate it might be time for an upgrade: 

1. Time-Consuming Processes 

If tracking expenses involves a lot of manual work, such as entering data into spreadsheets or sorting through physical receipts, it’s a clear sign of inefficiency.  

This process can eat up valuable time that could be better spent on other business activities. 

2. Frequent Errors 

Manual data entry is prone to mistakes. If you frequently find errors in your expense records, it can lead to inaccurate financial statements and tax filings.

These mistakes can also be costly to correct and may result in penalties or lost deductions. 

3. Delayed Reporting 

Efficient financial management relies on timely access to accurate data. If it takes too long to compile and report expenses, you might be missing out on crucial insights needed for decision-making.  

Delayed reporting can hinder your ability to make informed financial choices. 

4. Difficulty in Scaling 

As your business grows, the volume of expenses will increase. If your current system can’t handle a larger number of transactions efficiently, it’s a sign that you need a more robust solution.  

A scalable system can grow with your business without adding to your workload. 

5. Lack of Real-Time Insights 

Modern business environments demand real-time financial insights. If your system doesn’t provide up-to-date data, it can affect your ability to monitor cash flow and make quick decisions.  

Real-time tracking helps in managing expenses proactively. 

6. Inconsistent Data 

Inconsistent or missing expense data can cause significant problems during audits and tax season.

If you often find discrepancies in your records, it indicates that your current system isn’t reliable enough to maintain accurate and consistent data. 

7. Employee Frustration 

If your employees find the expense tracking process cumbersome and time-consuming, it can lead to frustration and lower productivity.

An efficient system should simplify the process for everyone involved, from submission to approval. 

8. High Processing Costs 

Managing expenses manually can be costly.

If you’re spending a considerable amount of money on processing expense reports, it’s a sign that an automated system could reduce costs and improve efficiency. 

9. Poor Integration with Other Systems 

Your expense tracking system should integrate seamlessly with your accounting software and other financial tools.

If you’re experiencing integration issues or having to duplicate efforts, it’s time to look for a more compatible solution. 

How to Choose the Best Business Expense Tracker 

Choosing the right business expense tracker is crucial for managing your finances effectively. The right tool can simplify expense tracking, ensure accuracy, and save you time.  

Here are some tips to help you choose the best expense tracker for your business needs: 

Key Features to Look for in Expense Tracking Software 

  • User-friendly interface: Look for software with an intuitive and easy-to-navigate interface. This will make it easier for you and your team to use it regularly without a steep learning curve. 

  • Card reconciliation: The best online expense management systems can automatically record and categorise expenses from bank accounts and credit cards. This feature reduces manual data entry and minimises errors. 

  • Receipt scanning: Ensure the software has a receipt scanning feature. This allows you to take photos of receipts with your phone and upload them directly to the system, making it easier to keep track of physical receipts. 

  • Integration with accounting software: Choose an expense tracker that integrates seamlessly with your existing accounting software. This will streamline your financial management processes and ensure all your data is in one place. 

  • Customisation options: Look for software that allows you to customise expense categories and reports. This flexibility can help you tailor the system to your specific business needs. 

  • Real-time reporting: Opt for an expense tracker that offers real-time reporting. This feature provides up-to-date insights into your spending, helping you make informed financial decisions. 

  • Multi-user access: If you have a team, ensure the software supports multi-user access. This allows different team members to input expenses, ensuring all costs are tracked accurately. 

  • Mobile app: Choose software with a mobile app that allows you to track expenses on the go. This is especially useful for businesses with employees who travel frequently. 

  • Security features: Ensure the software has robust security measures to protect your financial data. Look for features like encryption, secure logins, and data backups. 

  • Customer support: Reliable customer support is essential. Choose a provider that offers comprehensive support options, including live chat, email, and phone support, to assist you whenever you need help. 

ExpenseIn: Your All-in-One Expense Management Solution 

ExpenseIn is a powerful tool that simplifies and streamlines the entire process of tracking and managing business expenses.

It turns the old, time-consuming process of handling paper receipts and manual claims into a quick, digital process.  

ExpenseIn interface on mobile and laptopWhether you’re submitting, approving, or reporting expenses, ExpenseIn has you covered. 

Key Features & Benefits of ExpenseIn

  • Automated expense claims: From submitting to approving and reimbursing expenses, ExpenseIn automates every step. This cuts down on manual work and speeds up the entire process. 

  • Real-time receipt scanning: Just snap a photo of your receipt, and ExpenseIn instantly captures and categorises the expense data. This makes record-keeping and reporting much simpler. 

  • Automatic mileage & carbon calculations: Need to track mileage? ExpenseIn integrates with Google Maps to make this easy. Plus, it helps you report on carbon emissions if you’re focused on sustainability. 

  • Customisable approval workflows: You can set up approval processes that fit your company’s structure. This means expense claims are reviewed and approved accurately and efficiently. 

  • Built-in policy enforcement: ExpenseIn automatically checks each expense against your company’s policies. This helps catch any errors or non-compliant claims right away. 

  • Real-time reporting & analytics: Get detailed insights into how your money is being spent. This helps you make smart, data-driven decisions and optimise your budget. 

  • Seamless software integration: ExpenseIn works well with popular ERP and accounting systems, making sure all your financial data stays in sync. 

  • HMRC compliant & secure: ExpenseIn meets tax regulations and uses top-level security for data storage, giving you peace of mind. 

ExpenseIn helps businesses manage expenses more efficiently, stay compliant, and make informed financial decisions.

Whether you're a small business or a large enterprise, ExpenseIn can streamline your expense tracking and management processes. 

Guide to Tracking Business Expenses: Manual vs. Automated 

Tracking business expenses is essential for managing your budget, ensuring financial compliance, and making informed financial decisions.  

Here’s a step-by-step guide to help you understand how to track business expenses manually and why automated solutions are becoming the preferred method for modern businesses. 

The Manual Way of Tracking Business Expenses 

The Manual Way of Tracking Business Expenses

Step 1: Collect Receipts 

Collect all physical receipts from every business transaction. This includes everything from office supplies to travel expenses. 

Step 2: Record Expenses in a Spreadsheet 

Manually enter the details from each receipt into a spreadsheet, categorising them by type and date. 

Step 3: Store Physical Receipts 

Organise and store the physical receipts in folders or binders for future reference. 

Drawbacks of the Manual Method: 

  • Time-consuming: Manually entering data and organising receipts eats up precious hours that could be better spent on core business activities. 

  • Prone to errors: The likelihood of mistakes increases with manual data entry, leading to inaccurate expense tracking that can distort your financial picture. 

  • Difficult to scale: As your business grows, the volume of receipts and expense reports can quickly become overwhelming, making manual management impractical. 

  • Delayed reporting: Financial reporting is slowed down significantly due to the time required to gather and input data, delaying crucial business insights and decisions. 

Switching to an automated expense tracking system can alleviate these issues, providing a more efficient, accurate, and scalable solution for your business. 

The Automated Way of Tracking Business Expenses 

The Automated Way of Tracking Business Expenses

Step 1: Capture Receipts Instantly 

Use expense management software to capture e-receipts instantly.

Employees can take a photo of their receipt using a smartphone, and the software automatically captures and categorises the relevant data in real time. 

Step 2: Automated Data Entry 

The software extracts the necessary information from the receipts and enters it into the system automatically, reducing the risk of errors and saving time. 

Step 3: Real-Time Expense Approval 

Managers can approve or reject expense claims through the app, streamlining the approval process and ensuring faster processing. 

Step 4: Seamless Integration with Accounting Systems 

The software integrates directly with your existing accounting tools, ensuring that all financial data is synchronised and up-to-date. 

Step 5: Advanced Reporting Capabilities 

Generate real-time financial reports with just a few clicks. The software provides detailed analytics that helps in the budgeting process and financial forecasting. 

Benefits of Automated Expense Tracking: 

  • Efficiency: Automated data capture and entry free up valuable time, allowing you and your team to focus on what truly matters. No more tedious manual input. 

  • Accuracy: With automatic receipt scanning and data extraction, you significantly reduce the risk of errors. Say goodbye to inaccuracies and ensure every expense is accurately recorded. 

  • Scalability: As your business grows, easily manage an increasing number of transactions without adding to your workload. Automated systems handle the scale effortlessly. 

  • Real-time insights: Gain real-time insights into your finances with up-to-the-minute data. Make well-informed decisions quickly, driving your business forward with confidence. 

Embracing automated expense tracking brings a new level of efficiency, accuracy, and insight to your growing financial management needs, paving the way for smarter business operations. 

Best Practices for Effective Business Expense Tracking 

Best Practices for Effective Business Expense Tracking

1. Develop a Clear Policy for Business Expense Tracking 

Start by creating a clear expense policy that explains what counts as a business expense, how to document it, and how the approval process works. Using an expenses policy template can make this easier.  

Make sure all employees understand these guidelines to avoid confusion and keep things consistent. A clear policy helps streamline expense tracking and makes it easier to manage and reduce business costs. 

Pro Tip: Regularly update your expense policy to reflect changes in your business operations or tax regulations. Conduct training sessions to keep employees informed about the latest guidelines. 

2. Automate & Simplify with an Expense Tracking App 

As you’ve learned by now, manual expense tracking takes a lot of time and can be error-prone.  

Using an expense tracking app can save time and reduce mistakes. These apps automate data capture, receipt scanning, and categorisation, which cuts down on manual work.

They also provide real-time insights into your finances, helping you make informed decisions quickly. 

Pro Tip: Choose an expense tracking app that integrates with your accounting software. This seamless integration ensures that all financial data is synchronised, reducing the need for manual data entry and further minimising errors. 

3. Audit Regularly to Prevent Errors & Fraud 

Regular audits are essential for maintaining accurate business expense tracking.  

Schedule periodic reviews to check for discrepancies, ensure compliance with your expense policy, and detect any potential fraud. Regular audits not only help maintain accuracy but also reinforce accountability within your team. 

Pro Tip: Implement random audits in addition to scheduled ones. Surprise audits can be more effective in detecting fraud and ensuring consistent adherence to your expense policy. 

How Business Expense Tracking Helps Your Bottom Line 

Effective business expense tracking is crucial for keeping your costs under control and improving your company’s financial health.

By using automated solutions, businesses can save money and see a solid return on investment. 

The ROI of Expense Tracking Software 

When using a manual spreadsheet system for tracking expenses, consider this scenario: You receive 20 expense reports each month.

Here's what typically happens according to research from the Global Business Travel Association: 

  • Employee time: 400 minutes are spent by employees completing these reports. 

  • Processing costs: £759.20 is spent to process these reports. 

  • Error rate: 4 out of these 20 reports typically contain errors. 

  • Correction time: 360 minutes are needed by finance team members to correct these errors. 

  • Correction costs: £680.60 is spent to correct these reports. 

When you add it all up, the total cost of manually managing these expenses is approximately £1,439.80 per month. That breaks down to about £71.99 per expense report. 

In contrast, automated expense management software like ExpenseIn costs as little as £6.50 per active user each month (minimum user numbers apply).

The savings in time and money, along with improved accuracy and compliance, make it a smart investment for any business looking to improve its bottom line.  

Ready to transform your business expense tracking? Book a demo today to see how an automated expense tracking solution can save your business time and money.