What to know about expense reporting

Quick insights

• An expense report is an itemized document that details expenses incurred by employees on behalf of a business.
• Accurate expense reporting helps companies understand where money is going and track work expenses by department and expense category.
• Reviewing expense reports may allow businesses to create realistic budgets and forecasts.

Expense reports can be useful documents for both employees and their employers. Employees often file expense reports when they use a personal credit card for business purposes and request reimbursement. On the employer side, businesses typically use expense reports to document expenses for recordkeeping purposes.  

Below, we detail common information found in expense reports, examples of expense categories and different types of reports. Plus, we’ll cover best practices to consider when creating and processing expense reports for your business.

What is an expense report?

The purpose of an expense report is to accurately record the money going in and out of a business. This information can help companies monitor their cash flow and prepare for tax season.

Expense reports generally contain the following details for each purchase:

• Date
• Brief description
• Subtotal
• Expense category
• Attached receipt

Typically, employees are responsible for creating expense reports. Then, they send it to their manager and/or a finance stakeholder for review and approval.

Types of expenses

Businesses often have a mix of recurring and one-time expenses, also referred to as “fixed” and “variable” expenses:

• Fixed expense: An expense that remains the same over a period of time, regardless of business activity or production. Examples may include rent/lease payments, employee salaries or subscription services.
• Variable expense: An expense that fluctuates over time. Examples may include utility bills or sales commissions.

Expense report category examples

Categorizing expenses can help businesses understand how much they tend to spend in certain categories and budget accordingly. Additionally, it can be useful when preparing taxes.

Expenses may vary between businesses based on factors like industry and business size, but a few common categories include the following:

• Rent or lease payments
• Internet
• Phone services
• Insurance
• Employee benefits
• Travel and lodging
• Software subscriptions
• Legal fees
• Continuing education
• Advertising expenses

Types of expense reports

Expense report templates may differ between businesses, but there are a few common types of reports that many different businesses may use:

• One-time expense report: This type of expense report is most common for employees who don’t have regular business expenses. Employees may submit a one-time expense report for continuing education courses or miscellaneous office supplies, for example.
• Weekly/monthly expense reports: Companies may choose to detail fixed expenses on a weekly or monthly basis. Expenses may be organized by different departments or accounts.
• Travel expense report: Employees who go on business trips may organize airfare, lodging, transportation and meal expenses within the same report.
• Mileage expense report: If an employee regularly drives their own vehicle for work purposes, they may submit a mileage expense report. This report typically includes details about odometer readings, total miles travelled and specific destinations.
• Event expense report: If an employee organizes an event on behalf of their company, they may itemize the related purchases on an event expense report.

Expense tracking best practices

Now that you know some of the basics, it’s time to learn some expense reporting tips to get started. Here are a few best practices to consider before creating and processing a report:

Using standardized expense report templates

Instructing employees to use the same expense report template can help save time on administrative tasks. Instead of creating a spreadsheet from scratch for each report, employees can make a copy of a template that already includes all the necessary fields.

You can create further efficiencies for your business by creating templates for each different type of expense report. Try searching online for free pre-made expense report templates from accounting software companies.

Creating expense report policies

It may be a good idea to come up with a company expense report policy, even if you only have a few employees. This way, everyone can be on the same page about how to create, process and approve expense reports.

Part of the policy might cover which templates to use for expense reporting, spending limits for specific categories and any due dates. Additionally, it might be helpful to determine who will review and approve reports. This could be the employee’s manager and/or a finance stakeholder.

Using a business credit card with expense management features might help employers implement their expense policies. For instance, all Chase Ink business credit cards allow primary cardmembers to set spending limits for any employee with a company credit card. Keep in mind that some of these credit cards have an annual fee.

Investing in expense management software

The more expense reports created, the more associated business bookkeeping tasks will likely follow. These tasks can add up over time, taking away time employees could devote to tasks that can help grow the business.

One potential solution to this problem is to consider expense management software, which may help automate parts of the expense reporting process. This software can typically automate receipt capture, expense categorization, the approval workflow and more.

Keep in mind that this isn’t the solution for every business. If you run a small business with only a handful of expenses, it may not be worth the ongoing cost. If you find that your employees are spending an increasing amount of time on expense reporting, though, you may want to consider this option.

Routinely reviewing expenses

Once you set up an internal process for expense reporting, it may be wise to appoint someone to regularly review the company’s expenses. Keeping an eye on cash flow can help you understand where your business is allocating its money—and what potential improvements could be made.

For example, two employees may be paying for two different software programs with similar purposes. In this case, it may make sense to decide between the two programs to cut costs.

Reviewing expenses can also be a helpful way to identify spending trends. As you gather more data, you may be able to identify specific months or seasons in which your company spends more on certain categories. This practice may allow finance stakeholders to adjust company budgets accordingly.

In summary

Expense reports provide insight into day-to-day business expenses. Formally tracking expenses may allow businesses to have a better understanding of money, and identify any related improvements that could be made.

Businesses may want to consider adopting an expense report template or potentially investing in expense management software to help streamline the process. They may also want to consider opting for a business credit card that can assist in enforcing company expense policies.