It’s best practice to keep personal finances separate from business finances, since failure to do so can cause headaches during tax season or even trigger an expensive IRS audit. But that’s not always 100% possible; for example, an employee may have to run to the store to grab emergency office supplies.
Larger companies often have detailed policies regarding which employees can make business purchases (and when), but keeping track of expenses incurred is just as important for small businesses.
What is an expense report?
An expense report is a document listing business expenses incurred, typically for reimbursement purposes. You might create an expense report for a business trip or client lunch, or after running unexpected errands—any time you pay out-of-pocket for business expenses.
🌟Resource: Cash Flow Management: What It Is & How To Do It (+ Examples)
Why are expense reports important?
For employees, the main reason to file an expense report is to receive reimbursement. For business owners, expense reports serve two main functions:
They can reduce your taxes
Many business expenses are tax-deductible, meaning they can reduce the amount of tax your business owes. When you file your taxes, you’ll want to know exactly how much you spent on eligible expenses like business travel (for more detail on business expenses, see IRS Publication 535).
Detailed monthly expense reports will help you figure out exactly how much you can deduct, and will make your accountant’s life easier come tax season.
🌟Resource: Small Business Tax Deductions: 22 Money Saving Tips
They track expenses
Expense reports help you keep track of where your money is going, which is especially important for small businesses. You can use expense reports to inform your small business budget and provide a more accurate picture of your business’s finances.
What to include in an expense report
Expense report requirements differ between companies, but there are a few items you don’t want to forget:
Employee details
An expense report should include some basic information about the person submitting it (usually an employee). If you’re the person submitting the report, you should include your name and work email address, at minimum, so the recipient can contact you with any questions they may have.
If you’ve been tasked with creating an expense report template for your organization, consider whether other details—such as the employee’s job title and department, their payment preferences for reimbursements, or an employee ID—may be helpful to include.
Description of purchase
Descriptions should be brief, with just enough explanation so that the recipient can match each line item to the relevant receipt. For less obvious expenses, you may want to add some context showing how the expense relates to business, such as “Welcome dinner for six clients” instead of “Dinner.”
Receipts
Attach any relevant receipts or invoices to your expense report. These documents provide proof of purchase and are necessary for receiving reimbursement.
If you’re preparing an expense report template for employees to use, consider adding guidelines for how to submit receipts. For example, you might request that file names include the employee’s last name and the month and year they incurred the expense.
Expense report template
Our simple expense report template has everything you need to submit an expense report to your employer or client. It’s also easy to customize for your needs. You can use it as a monthly or weekly expense report template, or as a travel expense report template.
If you’re a small business owner, a customizable template in which totals are automatically calculated makes it easy to reimburse employees for business meals, business trips, and other itemized expenses.
How to make an expense report
The easiest way to make an expense report is to use an expense report template. Ask your supervisor if they can provide you with one; if not, you can use our free expense report template. Here’s what to do next:
1. Gather your receipts
Nobody likes digging around the bottom of a bag for crumpled old receipts. Make the expense-reporting process easier by snapping pictures of paper receipts as you receive them. Move emailed receipts to a dedicated folder within your inbox, or immediately export them as PDFs.
Your company may have a set schedule for processing expense reimbursement. If not, it’s a good idea to group your receipts by calendar month and submit them together in a single monthly expense report.
2. Customize your template
Before you start adding items to your expense report template, help your future self by customizing it with information that will stay the same in the next expense report, like your name and contact information.
If you’re creating a monthly expense report template for your team, you can add your business name to a standard template and change the template colors per your business’s brand guidelines.
3. List your expenses
List each receipt as a separate line item in your expense report. Include the date of the purchase, the amount, and a brief description.
If you create your expense report using spreadsheet software, you can automatically sort expenses by date and use formulas to calculate your total spend, which comes in handy if you have a lot of expenses to list.
4. Submit your expense report
Once you’ve inputted all relevant details into your expense report template, double-check your receipts to make sure the dates and amounts match. Submit your report according to your organization’s instructions. If you didn’t receive instructions, export your report as a PDF with a helpful file name like “[Your name] Expense Report [Month] [Year].” Send the report, along with supporting receipts, to the appropriate person, such as your company’s accountant.
If you’re creating an employee expense report template, it can be helpful to include instructions for submitting reports within the template itself or to provide a link to another document containing instructions. For example, should employees submit expense reports on a weekly or monthly basis? Do they need to list expense categories?
Expense report FAQ
How do I make a simple expense report?
If you want to make a simple expense report quickly, use a basic expense report template that you can update with your own details. Good expense report templates include space for the employee’s contact information and a formula to automatically calculate total expenses.
Can I automate expense reporting?
Typically, the employee who incurred the business-related expenses is responsible for filling out a company-provided expense report. You might need to fill out an expense report if you spend your own money buying office supplies or while on a business trip. Always check your organization’s policies before using personal funds for business expenses.
Can I automate expense reporting?
Yes, there is expense-reporting software and other accounting tools that will generate expense reports using images of receipts. However, it’s important to always check auto-generated expense reports before submitting them.
