Expense Management

The Road to Painless Expense Reports—and More Profits

Understanding what small business expense reports are, why they can be such a mess, and how you can make them not suck the life out of you.

Most of us know that expense reports help employees get reimbursed for out-of-pocket business expenses (airfare, hotels, chocolate-glazed doughnuts)...Or maybe you have no idea what they are, they’re not the most exciting thing and we don’t blame you. But did you know that small businesses can replace expense reports with something way better? It’s true. 

Instead of wasting time on expense reports, you could be better managing your cash flow, reducing administrative costs, and increasing profits (by not spending time and money on oh so tedious reports). 

Here’s the lowdown on what expense reports are, why they can be such a frickin’ pain in the a**, and how you can replace them with something much better for your small business. 

What is an expense report? (not a trick question) 

Expense reports come in two general flavors (neither of which taste good): 

1. Tracking expenses for tax purposes.

One version of an expense report is a document that tracks business spending, mostly for tax deduction purposes. It’s used to itemize and classify business costs by type of expense as well as client, vendor, account, and purchaser. Expense reports can match spending to line items in your P&L. For example, you might categorize trade shows and sales team travel as indirect selling expenses. Office supplies and computer equipment would be categorized as general operating expenses. 

These kinds of expense reports make it easy to find tax deductions when they group expenses by IRS tax category. A sole proprietor can deduct expenses related to: 

  • Travel by airplane, train, bus, or car 
  • Baggage and shipping
  • Dry cleaning and laundry
  • Lodging and meals
  • Communications, like mobile phone usage

For the most up-to-date Schedule C info, check the IRS website

2. Employee reimbursements.

The other kind of expense report is related to reimbursing employees. Someone (probably you) needs to generate an expense report whenever an employee requires reimbursement for out-of-pocket business expenses. It’s how most companies make sure that employee expenses match the cash being paid out.

Employee reimbursement expense reports are often created in spreadsheet form and generally include:

  • Name
  • Purpose
  • Time period
  • Date of each expense
  • Description of each expense (Vehicle milage, printer ink, cheese fountain, etc.)
  • Expense type for each expense (meals, lodging, etc.)
  • Amount
  • Employee signature
  • Authorization signature

Once this report is completed and signed by everyone that needs to sign it, the office manager will pay back the employee, often with a good ol’ fashioned paper check (old school, right?).

Why are my expense reports such a darn mess? 

Small business expense reports are often created using a basic excel spreadsheet that’s been circulating for years. Once the data is entered manually, the report is submitted along with a jumble of receipts collected throughout the month. And yes, it can be messy and error-prone. 19% of expense reports have errors. This type of report is just a means to an end (that reimbursement check). Management isn’t likely to gain any spending insight without some serious data wrangling.

Hidden costs? Seriously? 

Small business expense reports are costing you time and money. It takes about 20 minutes, on average, for an employee to complete a simple expense report. That’s time they could be using to generate revenue for your business. Plus it costs your business about $58 to process a single report. 

It’s especially awkward when an employee is waiting for funds, which could cause financial hardship and sap employee morale. Forty percent of employees would stop paying upfront for business expenses if the reimbursement period were significant.

Expense reports always require receipts, and it’s painful to keep track of them. Employees may try to hold onto paper receipts until the end of the month, when they may or may not end up smelling funny and have questionable stains on them. 

Do I have to use Excel for expense reports, or can I use something else?

Small businesses can ditch the spreadsheet and start using ClearSpend, a free all-in-one expense management and spend control platform for small businesses. It offers a fast, simple alternative to manual, tedious expense reports. Employees submit a receipt the moment they spend using the ClearSpend app. No more crumpled receipts or ink-stained fingers. ClearSpend automatically categorizes expenses for your to reconcile in the ClearSpend dashboard, where you’ll be able to view and analyze all your spend data in one place. 

With ClearSpend, you’ll be able to proactively manage your budget by issuing employees prepaid business cards to cover their expenses. No more reimbursements! This is why (among many other reasons) ClearSpend is the best expense management software for small businesses.

From reactive expense reporting to proactive spend management

When it’s done right, expense reporting can be a powerful spending management tool that drives business decisions. ClearSpend’s expense reporting solution helps small businesses with the following: 

  • Budget with a snapshot of spending by category, employee, and timeline… Are trade show expenses over budget? How much is sales spending on travel? Why are we breaking so many staplers?
  • Track and maximize tax-deductible expenses like sales training, client lunches or business cards (do people still use these?). 
  • Identify opportunities for efficiencies and cost savings…It’s time to set a cap on educational costs. You should renegotiate your mobile phone plan. Taco Tuesdays need to go. 

More spend control, less expense reports and receipts piling up on your desk (and the floor, let's be honest)

ClearSpend lets you control the types and amounts of purchases team members make with their ClearSpend card (which you can easily issue to them, rather than having them use their personal card on business expenses). For example, you might issue Jill, in marketing, a card with a $250 limit that you only want to be used to print brochures. If Jill needs to travel to a trade show next month, simply adjust her card limit and authorize travel expenses. 

Once company spend starts to flow through these prepaid business cards, ClearSpend takes care of the rest. Company spend data is consolidated and digitally accessible. Your accountant can save time and hassle by syncing transactions and receipts with QuickBooks Online. You can analyze spend data in real-time, improve cash flow management, and make better informed business decisions.

No more frontin'

Now comes the best part. Employees are no longer fronting cash for expenses (they spend more time generating revenue instead). Accounting isn’t tracking down missing receipts. Finance won’t be explaining why a reimbursement check is delayed. You can almost hear them smiling.

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