Business expenses are the costs that your company incurs while going about day-to-day activities. Company operations often involve spending, whether or not they’re directly linked to revenue. For example, hiring a venue is just as much a business expense as buying printer paper and ink for the office if you’re an event planning company. Managing and tracking these expenses is crucial for maintaining financial health and making informed business decisions.
As the cost-of-living crisis continues, 60% of respondents in our research with Ipsos said they feel anxious about using their own money for work-related costs. Out-of-pocket expenses also make it harder for businesses to track and control company spending – at a time when staying on budget is crucial.
In the following sections, we’ll examine the specifics of business expenses. What constitutes a reasonable expense policy? Do you need expense management software? What are expense cards? What do you need to know to be ready for the future of expense management?
Employee expenses can be considered a type of business expense. Travel expenses cover costs related to business trips, such as transportation, accommodation, and meals. Entertainment expenses typically include client meetings, team outings, or business-related events. Fuel expenses pertain to the cost of fuel for company vehicles used for business purposes. Subsistence expenses involve daily allowances for meals and incidental expenses while travelling for work.
Expense reimbursement is a crucial aspect of business expense management, as it involves paying employees back for money spent while getting their jobs done. You should track and report these expense claims efficiently to avoid wasting time on mindless admin or losing company money to fraud and manual errors. Effective expense management is crucial for financial stability. For example, according to the Global Business Travel Association, businesses can save 10-12% on travel expenses through rigorous expense management policies. You can either avoid having to reimburse employees in the first place by ensuring they each have access to a company card or implement a workflow that allows you to simplify the process of submitting and approving reimbursement requests. Many business expense apps have features like receipt capture and real-time expense tracking that will enable you to do this while reducing the administrative burden on your staff and minimising the risk of errors and fraud.
A well-developed expense policy should clearly outline the relevant allowable expenses and the proper procedures for your team to submit expense requests and have them approved. You should also include guidelines for travel and entertainment (T&E) expenses and any subsistence allowances you want your employees to have access to.
Your business expenses can have significant implications on your company’s financial health. Expense accounting involves tracking and categorising expenses for effective tax planning and compliance. Using a VAT calculator can help you to pre-empt the VAT you owe or can claim back, which impacts your financial statements and potential cash flow.
Correctly accounting for expenses is essential for accurately preparing your profit and loss statement, a key financial document that reflects the profitability of your business. It shows the relationship between revenue generated and expenses incurred, providing vital insights into the financial performance of your business. This is crucial documentation you’ll need when you or your accountant comes to file with HMRC and companies house at the end of the financial year. Remember that different types of expenses may have different tax treatments, so you must understand these complexities or speak to an accountant.
As the world evolves into a single, global economy, the need for real-time analytics to track expenses across different regions is critical. Cloud-based expense management platforms will allow you to access and analyse expense data promptly, leading to better decision-making and cost control. If your business can embrace and adapt to these trends, you’ll gain a competitive edge as you free up time to grow your business.
With Soldo, you’ve got an end-to-end spend management platform, with a synchronised mobile app and infinite company cards. These combine seamlessly to provide complete oversight and effortless control over spending. It’s a simple, streamlined way to allocate every project and team the money they need when they need it.
For more insights on what else Soldo can do to help finance teams grow their business, get started today.
Learn more about which business expenses are allowable (and which ones aren’t) plus how to use expense management software to keep records HMRC can’t argue with.Read article
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