How to create an expense report

Quick insights

• An expense report is an itemized list of purchases made on behalf of a business.
• Many employers may use spreadsheets, expense management software or pre-made templates to create expense reports.
• Detailed expense reporting helps businesses prepare for tax season by tracking which expenses are tax deductible.

Expense reports help employers or finance teams keep track of how much money they’re spending, what they’re spending money on and how much is approved for reimbursement. This practice allows both small and larger businesses to manage their budget and organize information for tax purposes.

While many expense reports are related to reimbursing employees for purchases made for the business, it’s also important to keep track of business expenses incurred by the owner and key stakeholders.

Many businesses use Excel templates or expense management software to create expense reports. Below, we cover what expense reports typically include and how to create them.

What is an expense report?

Expense reports track any expenses related to running a business, and each report will differ between businesses. For example, a pharmaceutical company may track their sales reps’ mileage, lodging and parking expenses while a small online clothing seller may focus more on packing and shipping costs.

The following information is typically found on expense reports regardless of the business or report type:

• Purchase date
• Brief description of expense
• Total amount
• Category of expense (Travel, food, mileage, etc.)
• Receipts for each purchase
• Subtotal for each category
• Total of all expenses
• Total reimbursement amount

Benefits of expense reporting

Accurate expense reporting allows businesses to keep an eye on how much they’re spending each month and in which categories.

Here are a few reasons why small businesses may want to consider using expense reports consistently:

• Identify spending patterns and opportunities to cut redundant costs
• Track overall spending to create or revise budgets
• Simplify tax preparation
• Streamline the employee reimbursement process

In addition to expense reporting, small business stakeholders may want to consider applying for a business credit card. Some business credit cards allow employers to separate business and personal finances and monitor employee spending.

Chase’s Ink suite of business credit cards also provides individual employee credit cards at no additional cost, which may simplify the reimbursement process further.

How to create an expense report

These days, many businesses automate the expense report process by using a combination of accounting software and expense management software. These types of applications save receipt images and create reports after employees fill out a few fields.

Here’s a more detailed look at how to create an expense report:

Choose a template or accounting software

Businesses typically have two options for creating expense reports: use a template or purchase expense management software to automate the process.

• Template: There are many free expense report templates out there from popular accounting brands. It can be important to customize the templates to your specific business needs.
• Software: Investing in expense management software may be a good idea for growing or larger businesses. These applications often connect to your bank account to further expedite the process by downloading transactions and categorizing expenses.

Create an itemized list of expenses

Each expense should be listed on a different line of the report. It may also be helpful to require employees to include a brief description of each purchase.

For example, if the expense was on behalf of a client, it may be useful to include that in the report. This way, finance stakeholders can track how much the business spends on each client and set a budget if necessary.

Attach receipts

It can be important for employees to upload receipts for each individual expense for tax purposes. This is because you’ll need evidence (like receipts) to deduct business expenses from your taxes.

Most expense management software options allow employees to capture receipt images so that it isn’t necessary to hold onto physical copies.

Categorize expenses

Ensure that each expense is categorized. This is also useful for taxes, as the IRS has a set list of business categories that are tax deductible. It may help to come up with set categories for business spending so employees better understand what to include in their reports.

For example, mileage and airfare may fall under the “travel” category. Or, if your business spends a lot on travel, it may make more sense to separate mileage and airfare into their own categories.

Calculate the total

The last step of the process is calculating totals, which most software options will do for you. If you’re using a template, you can also employ formulas to automatically calculate report totals. Be sure to include the final total and subtotals for each category.

Best practices for expense reporting

Implementing an expense report process for your small business? Here are a few tips to help stay organized:

• Create an approval process: Choose key stakeholders who need to review and approve individual employee reports. You may choose to require managers to approve their employees’ reports and a key financial stakeholder to have the final say.
• Train employees: If employees are required to use a personal credit card for business purchases before getting reimbursed, it can be helpful to make sure they understand how to create an expense report and what information is required. Properly train each employee on the process once they are hired.
• Try out free templates: If you run a small business and are unsure if you have the funds to purchase expense management software, you may want to explore the free resources available online. Many popular software brands provide free spreadsheet templates.

In summary

Expense reporting can be an integral part of tracking business expenses and reimbursements. Proper expense reporting can help small businesses understand their spending habits and make improvements to their budgets as needed.

Ready to take the next step and apply for a business credit card? Explore our business credit card options today.