What is an Expense Report & How do Systems Streamline Them?
July 13, 2022
By Adriana Amato
For many small business owners, the monthly expense report can be the stuff of nightmares. Whether it’s a matter of not having enough time in the day or that bookkeeping and tracking expenditures is simply not your strong suit, it’s tempting to put off the expense report until tax time.
However, keeping track of your business expenses throughout the year will not only make filling out your tax return a whole lot easier, it’s also vital to the survival and success of your business. So, to help you conquer that dreaded expense reporting process once and for all, let’s take a look at what you can do to streamline it and make life easier for yourself.
What is an expense report?
Put simply, an expense report is a document that tracks business spending. Whether it’s travel expenses from a business trip or office utility bills, any purchases that are necessary to run your business can be included in an expense report.
Expense reports can be utilised across the business in different ways but, particularly for small businesses, they are most commonly used by employees to track expenses for reimbursement.
For example, when employees partake in business travel, take taxis to external meetings or take clients out for dinner, they incur costs that the company will later need to repay. Therefore, each employee expense, along with the total cost, must be detailed in a report for the employer’s records.
How should SMEs use expense reports?
On one hand, expense reports ensure that expense reimbursements are processed, but they are also useful for tracking project spending and identifying deductible expenses for business tax deductions.
Although many people in the business might want to put off expense management because it can be time-consuming, it can be an extremely useful tool for ensuring that your small business is on track financially. With the right expense report software, you can easily break down your business spending over different departments and across various reporting periods. Whether it’s per month, per quarter or per year, your expense reports can help you understand where you are making, wasting or losing money.
Read more: Tips to Streamline Employee Expenses & Reimbursements
What an expense report should look like
Expense reports can vary but, generally speaking, they should display all the necessary information in a format that is easy to read and understand. Many people use Microsoft Excel or similar programs to create a spreadsheet or table to display the data.
The important thing to remember is that an expense report needs to be able to answer ‘What, who, when, why and how much?’
- What was purchased?
- Who purchased it?
- When did the transaction occur?
- Why was it purchased?
- How much did it cost?
The format and complexity of expense reports vary depending on whether or not they are a long-term report (quarterly or annual), a mileage log or a one-off reimbursement form. However, basic one-time expense reports tend to follow a similar format which includes the following columns:
- The date
- A description of the expense (validation)
- Expense category or expense type (in accordance with the company’s expense policy)
- Total amount
The report should also include the employee’s name as well as the line manager who should authorise the reimbursement. Proof of purchase such as receipts should also be attached to the report.
If you’re not sure where to start, it’s very easy to find an expense report template online. Many of these are free to download and then you can adapt them to suit your specific needs.
What should your business include in its expense reports?
As we’ve already established, an expense report can be used at various levels across the business. What you include in your report will naturally depend on what kind of report it is. An annual report for the entire business, for example, is often used to detail company profits and identify tax deductible spending. As a result it will be far more complex and will include a lot more data and information than a one-off expense form for an employee to be reimbursed for a taxi journey.
However, broadly speaking, an expense report should include an itemised list of all relevant spending. Whether that’s company card transactions or reimbursement for the use of a mobile device, any spending related to the running of a business can theoretically be included.
Items to detail in an expense report can include:
- Office expenses, rent and utilities
- Repairs and maintenance
- Vehicles, machinery, and equipment
- Travel and meal costs
- Car and truck expenses
- Legal services
Please note, however, that not all of the above will be relevant for every type of expense report. Your business should clearly outline what is and isn’t determined as an expense in the company’s expense policy.
Read more: Tips for Perfecting your Employee Expense Policy
The pros and cons of using an expense report template in Excel
Many small business owners use Excel because it’s a cheap option which requires little training. Most people can use excel to at least a basic level so this makes sense. However, while it seems like an easy and low-cost option in the short term, it does have its pitfalls.
Excel has many features which can do a lot of the maths on your behalf. It can calculate subtotals and grand totals at the click of a button but, at its core, it is still subject to human error. It requires manual data input and lacks the flexibility and adaptability of other software. It also isn’t easily integrated with accounting software, project management software and CRM systems.
How to automate expense reporting using expense management software
The benefit of using automated expense management software is that it minimises effort and maximises efficiency. While it is more costly than downloading a basic excel template, it allows you to automate workflows, saving you lots of time and money in the long term.
Some of the other major benefits of expense management software include:
- Real time tracking of expenses across the business
- Fast reimbursements for employees
- Increased compliance and accountability
- Automatic and customised reporting
- Integrations with accounting software
- Eliminates manual data entry
Automated expense management ultimately allows you to track, monitor and manage spending in real-time. It can help you to identify areas of weakness and minimise or eliminate unnecessary costs before it is too late.
Build your expense reports accurately and efficiently with Weel
Expense management doesn’t have to be time consuming and laborious. With the right software and support, you can have accurate and up to date reporting at your fingertips. With features that allow the software to automatically capture merchant data, GST, and GL codes from each credit card transaction, you can save your staff hours of expense tracking. And, with virtual company cards and adjustable spending limits, you can control your company’s expenses with ease.
For more information or to find out how you can streamline your reporting processes with Weel, check out our expense management software today.