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Updated Feb 08, 2024

What Is An Expense Report?

Expense reports help you understand where your money goes.

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Dock Treece, Business Strategy Insider and Senior Writer
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To manage your business’s financial health effectively, it’s essential to have a clear picture of where your money goes. Expense reports are central to this understanding. These reports offer a detailed view of your business’s expenditures. For precise financial record-keeping, it’s crucial to understand expense reports, their usage, their components and their significance.

What is an expense report?

An expense report serves as a comprehensive record of a business’s expenses and may cover a particular department, specific project or individual employee. An expense report meticulously organizes expenditures and categorizes them by various criteria, such as the payee and the nature of the expense. 

Expense reports are vital tools for managing small business finances. They help business owners and managers monitor financial outflows to gain pivotal information to evaluate the company’s financial standing, pinpoint cost-saving opportunities and enhance profitability. They simplify the process of filing tax returns, claiming tax deductions and ensuring a smooth auditing process.

Did You Know?Did you know
Expense reports facilitate employee reimbursements, such as mileage reimbursements, to help pay team members promptly for approved business-related expenses.

What does an expense report include? 

Expense reports vary in structure. While some provide a comprehensive overview of spending for a specific duration (like a month or quarter), others focus on itemized expenses tied to a particular employee or project. 

Expense reports typically contain the following elements:

  • The date of the expense transaction
  • The recipient or vendor of the payment
  • A paper receipt or digital record of the payment
  • Linkage of the expense to a specific client or project
  • The complete payment amount, including taxes and other associated charges
  • The designated category or nature of the expense 

Beyond these primary details, expense reports might also feature annotations regarding individual expenses or the overall amount, elucidating the reason for the expense or any forthcoming costs tied to the same project or client.

How do you create and fill out an expense report?

When constructing an expense report, the primary goal is identifying the expenses to be included. Expenses can be based on the payee, spending category (type of spending) or a particular project or client to which the expense was related. It can also be based on the employee who paid the cost.

The process for building an expense report is straightforward:

  1. Determine what expenses you want to include in your report.
  2. List the expenses that meet your criteria, including the details listed above.
  3. Total the expenses included in your report.
  4. Add notes about expenses incurred or total paid.
  5. Give your report a date, number and title based on what it includes.

Why are expense reports important?

Expense reports are crucial because they empower managers to oversee the financial activities of a department, team or organization ― particularly expenses associated with specific clients or projects. Besides aiding managerial oversight, expense reports ensure employees receive reimbursements for business-related expenses they’ve borne, such as business travel or client entertainment. 

Expense reports are essential because they do the following: 

  • Monitor departmental spending and overall cash flow
  • Determine profit margins by offsetting expenses against total revenue
  • Facilitate employee reimbursements for valid business expenditures
  • Keep tabs on costs linked to specific projects, products or clients 

Expense report categories and associated expenses

You can run expense reports for various categories depending on your industry and the business expenses you’re tracking. For example, consultants might log client-specific expenses while manufacturers might track product-related costs. Sales representatives often record and claim travel and entertainment expenses.

Here are some examples of typical expense report categories and what they include: 

Expense report category

Possible included expenses

Employee wages

Costs related to employee payments and employee benefits 

Office expenses

Costs for supplies, equipment and utilities

Rent

Commercial lease payments or mortgage payments (preferably broken out into principal and interest payments) for business facilities

Repairs and maintenance

Expenses for fixing or maintaining facilities or equipment

Legal and professional

Costs related to a specific client or project

Insurance

Expenses for small business insurance, including general liability, professional liability, workers’ compensation or commercial auto policies (or travel insurance for business travel)

Taxes and licenses

Licensing costs and business registration fees or other taxes paid to local, state or federal governments

Travel and meals

Costs related to flights, hotels, rental cars and possibly incidentals

Marketing and advertising

Ad buys and creative costs

Work vehicles expenses

Gas, insurance and maintenance costs for business vehicles

Did You Know?Did you know
Expense reports are crucial for keeping accurate records to claim small business tax deductions for qualifying business expenses and to measure the profitability of a company and its specific activities.

The best accounting software for tracking expenses and creating expense reports

Among our picks for the best accounting software, we recommend the following platforms for expense management and reporting:

  • Intuit QuickBooks: The gold standard in accounting software goes beyond tracking your expenses automatically. It also categorizes all your expense transactions automatically, saving you substantial work when it’s time to claim tax deductions. Explore this platform’s other features via our Intuit QuickBooks accounting software review.
  • FreshBooks: With the FreshBooks mobile app, you can snap photos of physical receipts easily to document your expenses. FreshBooks also reconciles your spending records with your bank data automatically to ensure you’ve captured all your expense transactions. Learn more via our FreshBooks review.
  • Xero: You can view your current and projected expenses from the Xero dashboard. The mobile app also powers immediate reimbursements for any expenses your team has filed. Check out our Xero review to learn what else this vendor offers.
  • Zoho Books: This accounting software platform includes tools for automating your expense tracking. You can also view your top expenses as well as the projects for which you’ve incurred billable expenses, directly from the Zoho Books dashboard. Read our Zoho Books review to learn about this platform’s additional features.
  • Wave Financial: Connect Wave to your financial institutions ― it offers 10,000 such connections ― and you’ll make it easy to download and import expense records. The Wave mobile app is also great for converting paper receipts to digital expense records. Our Wave Financial review details the extensive functionality of this entirely free accounting software.

Expense report FAQs

Company policy and business type determine who can submit expense reports. In many cases, only managers can submit expense reports. In other instances, anyone who spends money for approved business purposes and must be reimbursed can submit one. Sometimes, anyone can submit a report, but a manager must endorse it.
Most accounting software can be used to prepare expense reports. All the software needs is the ability to export selected expenses, such as by payee, category, check number or other factors. In addition to traditional accounting software, dedicated software packages can help employees submit expenses for reimbursement. Spreadsheet programs, such as Microsoft Excel, can also be used to prepare expense reports manually.
An expense is any instance in which a business representative outlays cash for a business purpose. It can be to procure equipment, services and more. However ― especially for employees seeking reimbursement ― the outlay must be an actual business expense. Many companies have strict policies about this, so employees must understand these policies before submitting expenses. If expenses are only being considered for general expense reports (not related to reimbursement), then that's a subject to be discussed with finance managers within the company. The goal is to construct reports that present management with the most accurate and consistent view of the finances of the company or a particular department or product line.
A monthly expense report details company outlays paid over a given month. These reports are not typically used for employee reimbursement but to track company or department spending, allocate expenses to specific projects or clients and compare expenses to revenue to determine a company's overall profitability. These reports typically are organized by category or payee and can be tremendously helpful for companies to coordinate planning, budgeting and resourcing requirements.

Saving records of your spending

There should be clear records of all money flowing in and out of your business. Expense reports create this documentation, whether for expenses being reimbursed to employees or those being compared against revenue in general reports. They’re how you get a handle on your company’s spending and make smarter decisions moving forward. Track your expenses now and you might have less costly ― or fewer ― ones before you know it.

Max Freedman contributed to this article.

author image
Dock Treece, Business Strategy Insider and Senior Writer
Dock David Treece is a finance expert who has extensively covered business financial topics, including Small Business Administration (SBA) loans and alternative lending. He is the Senior Vice President of Marketing at BNY Mellon and the former Editorial Manager at Dotdash. He also previously worked as a financial advisor and registered investment advisor, as well as served on the FINRA Small Firm Advisory Board. Dock brings more than 17 years of experience, including his time as an entrepreneur co-founding and managing a small business. His entrepreneurial background gives him firsthand insight into the challenges small business owners face and the tools and tactics they can use to succeed.
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