How to Categorize Business Expenses
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It is a well-known fact that businesses must spend money to make money. You need to keep track of your business expenses carefully, not only for tax purposes but for the sake of knowing your company’s financial health also. Here you will find expense categories that most businesses track and what types of expenses belong in each category.
Any expenses related to your marketing/advertising campaigns need to be included in this category of business expenses. This includes any public advertising online or offline. It should also cover the total cost to develop the actual ad as well.
This information should include money spent on oil changes, tire changes, mileage write off, fuel charges, and other general maintenance performed. It should also include any payments for rent/lease of a vehicle, plus insurance payments paid parking and tolls.
This category of business expenses includes the wages you are paying all employees. Knowing what it costs you to keep your company running is often the largest and most significant expense to keep a record of. If you outsource payroll, this should also be an added expense to track and you can learn more about payroll outsourcing at https://www.paycom.com/our-solution/expense-management/.
Benefits for Employees
Expenses that should be included here are benefits that the company is paying a portion of, or the entirety of, for their employees. These expenses can consist of insurance, retirement, paid vacation days, paid sick days, and any money spent to provide additional employee training.
Client business lunches or going out for coffee should be recorded here. This is also where you would record expenses related to company/holiday parties. Be sure to keep track of your receipts to file these expenses properly.
Keep the expenses for office equipment separate from office supplies. Expenses in this category should include substantial equipment such as a computer, printers, scanners, copiers, etc. Any cost for new software purchased should be included in this category as well.
Expenses recorded here should include money spent on paper, pens, pencils, staples, staplers, etc. It should also cover expenses for replaced ink cartridges in printers/copiers and postage paid for mailing. Office furniture expenses should be listed here also because some can be tax-deductible.
If you contract services out to specialists in a particular field, such as accounting or research, you would include all the costs associated with that process in this category.
Just like your home, companies have the same expenses. Any money you pay for the rent/mortgage on your business location gets recorded here. Likewise, any utility payments for phones, electric, water, etc. are recorded here as well.
Costs associated with your travel or an employee’s travel is recorded here. This includes all money spent on flights, car rentals, hotel stays, and meals while on business trips.
Breaking down and tracking your business expenses into easy to understand categories helps your business stay organized. When it’s time to file taxes, the company will benefit from the organization because items will be easier to find. Tracking expenses thoroughly and keeping them organized is an essential part of keeping your company successful and planning for the future.