How to Write a Great Business Expense Report: A Step-By-Step Guide with Examples

Business trips, travel, gas, renting vehicles, legal services, lunches with future partners. These are just some of the expenses that are an indispensable part of doing business.

In most cases, your employees will pay for these expenses out of their own pockets. Later, they will ask your company to reimburse the exact amount they spent. This is done through business expense reports.

We understand. Creating a business expense report isn’t the most interesting task in the world. But, it is a crucial skill that all employees must learn.

Knowing how to write a great expense report can make a huge difference in a company. As an executive, you will have a much easier time tracking company spending which will later also help you with preparing financial statements for the tax season.

In this article, we will go through what business expense reports are, why they are significant, what they should include, and provide you with a step-by-step guide you can follow to create a great business expense report.

• What Is an Expense Report?
• Why Do We Need Expense Reports?
• What Should Be Included in a Business Expense Report?
• 6 Steps to Create an Expense Report
• Expense Reporting Best Practices
• Expense Report Templates
• Manage Expense Reporting and Finance Operations with Databox 

What Is an Expense Report?

A business expense report is a form that justifies company expenses that were made for the purpose of running a business.

Operating any type of business comes with certain expenses that cannot be avoided. They include gas, meals, parking, travel expenses, hotels, and many more. Expense reports document all these expenses in one place so you can track where company money is being spent.

When you know where the money is going, you can evaluate your company’s financial health, calculate profits and losses, and analyze business efficiency.

Employees are the ones who submit expense reports so the business entity can reimburse the money they spent from their own pocket while doing work for the company.  

Most companies today ask their employees to attach receipts to the expense report to make sure everything is legit. After carefully examining the expense report, the business entity reimburses the money if everything in the report is accurate and valid.

Once the company reimburses the money, the accounting department files the amount as a business expense.  This expense is later taken into account when calculating profits and taxes.

Typically, employees create expense reports in Word, Excel, PDF, or in specific accounting software that the company is using.

Related: 9 Vital Small Business Financial Reports for Your Organization

Why Do We Need Expense Reports?

It is not uncommon for executives to dismiss the need for an expense report if they already have an accounting department that takes care of financial statements. This is a huge mistake.

Here are a few reasons why business expense reports are vital for any type of business.

• They Enable Effective Cost Control
• You will Know the Accurate Reimbursement Amount
• Doing Taxes will Be Easier

They Enable Effective Cost Control

Expense reports contain information about the cash outlays in your company. This information will help you understand how much money your employees are spending and what they are spending it on.

There are several expense categories in each business. By having an insight on which category is driving costs you can start implementing certain cost control methods.

Analyzing expense reports will help you see the bigger picture and you will be able to determine which costs you can reduce and which you should focus on. 

You Will Know the Accurate Reimbursement Amount

Like we said, employees will often pay for certain expenses with their own money but expect the company to cover those expenses through reimbursements.

Using expense reports gives you an insight into when, where, and why those expenses incurred. Your employees should create accurate reports so you don’t end up paying more than you have to.

Additionally, you should ask your employees to attach receipts to the report to provide evidence about the incurred expenses. This is called an itemized expense report. Receipts also help you determine whether the expenses are compliant with the expense policy.

Doing Taxes Will Be Easier

Most business expenses are tax-deductible. But you will need proof that these expenses occurred.

While some executives use corporate card statements as proof for deductible expenses, expense reports are a much better alternative. Business accounts or credit card histories aren’t always reliable since they can’t track down all expenses.

Expense reports also make it impossible for any expenses to pass overlooked. When tax season comes, all your accounting department has to do is calculate the expenses and place them in the suitable tax form.

When designing the expense policy in your firm, make sure to use categories and terminology that the IRS uses. This simplifies the whole process.

For example, sole traders should use Schedule C (IRS Form 1040) categories to track business expenses.

Schedule C expense categories include the following terms:

• Advertising
• Car and truck expenses
• Commissions and fees
• Legal services
• Office expense
• Rent or lease
• Vehicles, machinery, and equipment
• Repairs and maintenance
• Travel and meals
• Utilities

What Should Be Included in a Business Expense Report?

Different businesses include different things in their expense reports. Yet, the fundamentals are almost always the same.

Include these things in your expense report to make the most out of it.

• Date and amount. Expense reports must include the exact date and amount of the incurred expense. The date and amount in the report have to be the same as on the receipt.
• Employee information. The employee that submits the report has to include some basic information such as their name, department, SSN, and contact information.
• Seller information. This is the information of the vendor from whom an item or service was purchased.
• Expense type. For easier navigation, always include the type of the incurred expense. The usual types are meals, car rentals, air tickets, legal services, etc.
• Brief description. Adding a brief description about why a certain expense had to incur can be helpful later for cost control.
• Sub-total. This refers to the sub-total of each type of expense. Bookkeepers use the sub-total when updating information in the accounting software.

These are the necessary details that all expense reports have to include. Any additional ones will depend on the type of business you run.

Related: 5 Real-World Finance Report Examples and Templates to Inspire Your Own

Create an Expense Report in 6 Easy Steps

Creating a good business expense report can be a bit difficult. However, if you invest time and practice, it will become easier.

Follow these 6 steps to create a great expense report.

1. Choose a Template
2. Rework the Columns
3. Use Multiple Line Items
4. Do the Math
5. Don’t Forget the Receipts
6. Consider Switching to Software

1. Choose a Template

Templates are the basics of expense reports. They are the underlying foundation. To create one from zero will take up a lot of your time. This is why most businesses opt for the free templates that Excel, Google Sheets, PDF, and Word offer.

Excel templates already contain important columns such as the employee name, identification number, date, invoice number, and manager name. All you have to do is fill these columns with your specific data.

Furthermore, you can edit these templates and add other columns if needed.

2. Rework the Columns

Microsoft Excel and Google Sheets expense report templates include the usual categories. It is best to personalize these templates based on expenses that your business most often incurs.

For example, if your employees often need services from lawyers, non-profits, charities, or other legal entities, you should add a “Legal Services” column. Make sure the column name matches the tax category. This will help you itemize expenses and fast-track the tax-deductible amount.

3. Use Multiple Line Items

For a solid structure, organize your expense reports with multiple line items. You should report different expenses separately.

Also, provide as much detail as you can. To track expenses efficiently, you should provide some basic information on why the expenses incurred.

Make sure to sort expenses by date, from the most recent to the oldest.

Once you have all the expenses separated, you can add the tax amount to the total amount.

4. Do the Math

Use the different subtotals from all the categories and calculate the total amount of all expenses. This makes expense tracking easier since you will better understand how much money you are spending on individual categories.

5. Don’t Forget the Receipts

Receipts are the main evidence you have that you spent an X amount of money on a certain category. Make it company policy that your employees have to attach the receipts to get reimbursed.

Depending on whether you use a printed format or an electronical one, you can ask for photocopies or scanned copies of the receipts.

6. Consider Switching to Software

Using free Excel, Google Sheets or Word templates can only get you so far. This is why this option is most popular among smaller companies.

If you run a bigger business or are on your way to becoming one, you should consider switching to expense tracking software.

Logging into multiple tools to check how your business is performing is time-consuming. Using software can free up a lot of time that you can spend on value-adding activities.  

Databox software enables you to monitor and report performance in one place. It combines data from different sources and helps you get a comprehensive view of your company’s financial health at a glance. With Databox, pulling data and KPIs from different sources onto one screen can be done in a matter of minutes. Just connect your data source (such as Google sheet with expense information), display your data any way you like, share your dashboard with others, or download it as a report.

Databox also gives you the flexibility to create custom expense report templates using our Dashboard Designer.

Expense Reporting Best Practices

Your company’s expense report policy is important work and you shouldn’t take it lightly. You want to make everything crystal clear so there aren’t any grey areas that your employees could exploit.

To make the most out of your expense reporting system, implement these 4 practices:

• Set Strict Policy Guides
• Simplify the Process
• Corporate Credit Cards
• Regular Audits

Set Strict Policy Guidelines

A company’s policy should have strict guidelines that explain exactly which expenses your company will cover. Make the policy understandable so your employees know which reimbursements they are entitled to.

By eliminating any grey areas, you will minimize the chance of overpaying for certain expenses. Try to predict some of the questions that your employees might have and include the answers in the policy.

Simplify the Process

When it comes to reporting systems, simple is always better. Your employees should be able to report expenses, track how much they are spending, and submit receipts as soon as expenses incur.

We live in a digital era, so take advantage of that. By using online business expense reports, an employee can update their reports and add scanned copies of receipts almost instantly.

Corporate Credit Cards

You can control your audit process easier if you issue corporate credit cards. Credit card statements are a great way to make sure the amount listed in the expense report is accurate.

Additionally, you won’t have to deal with the reimbursement procedures. The employees will be using the company card when paying for expenses.

Regular Audits

Routine audit processes are, well, a routine nowadays. There are quarter, bi-annual, and annual audits. The period depends on how frequently your employees run into business expenses.

Audits will give you an insight into how much money each expense category uses. Based on what you find, you can redevelop the expense reporting procedures and find ways to reduce any unnecessary costs.  

Expense Report Templates

The fastest way for you to track expenses is through expense report templates.

Creating a template from scratch can take ages, which is why we prepared a few dashboard examples that you can download for free:

• Quickbooks Dashboard
• Quickbooks: Profit and Loss Overview Dashboard
• Xero Dashboard
• Xero: Profitability Overview Dashboard
• PayPal (Account Overview) Dashboard

Quickbooks Dashboard

Do you use Quickbooks to keep track of cash flow information, bank accounts, sales, and expenses? Then, this Quickbooks dashboard will enable you to monitor all these data in one place and have a better understanding of all the financial transactions in your company’s business.

Xero Dashboard

The Xero dashboard template helps you keep your books in order by having a clear overview of your cash flow, sales, income, and expenses. Download our Xero dashboard and connect it to your Xero account for more efficient KPI accounting and book-keeping.

Xero Profitability Overview Dashboard

Use our Xero profitability overview dashboard to make sure you meet your monthly, quarterly, and yearly income goals. Download the Xero PO dashboard template to make sure everything is running smoothly in your company.

PayPal Account Overview Dashboard

Tracking PayPal transactions isn’t as straightforward as it may seem. To better analyze the financial situation of your business, you need a clear PayPal account overview. For a clear and customizable overview of your PayPal transactions, download our PayPal dashboard template.

Manage Expense Reporting and Finance Operations with Databox

Nowadays, almost every business does its expense reports each month. Since everything is done manually, this process takes a huge amount of time. Employees have to report the incurred expenses, attach the receipts, and then submit the reimbursement form for approval.

It isn’t a one-person job either. Your accounting department is also involved in the process. They check if the numbers are accurate and valid. If everything is legit, the employees will be reimbursed a few weeks after they have submitted the report.

If all this seems like a hassle, it’s because it is.

There are many downsides to manual processing. Not only it’s time-consuming, but employees typically wait for previous reimbursements for too long, and you don’t have accurate information regarding the cash outlays.

But that’s where Databox comes in.

Databox can help you save your time on handling receipts and get a clear understanding of where the company money is going. Our tool can help make the entire process easier, more accurate, and eliminate any chances of error — which will benefit both you and your employees.

But don’t just take our word for it, experience it yourself. Sign up here for a free trial and let us help you streamline business expense reporting as soon as today.