The path to small business success is smoother when you are in control of your spending. As you work through the everyday challenges that are a part of running a business, it’s important to avoid slowing your momentum as a result of wasting resources. Efficient spending gives you more breathing room to operate your business and achieve healthy growth sooner.

And establishing proper spend management is only possible with effective expense tracking, which is why it is so important to become familiar with expense reports.

What is an Expense Report?

An expense report is a financial document that provides a record of business expenditures over a defined period of time. Unlike a profit and loss statement, which shows the expenses and income of a business, an expense report focuses solely on business expenses. Expense reports can be produced for varying periods of time, i.e. monthly, quarterly, or annually. and can be used to track expenditures for a specific project, employee, or department, as well as for the business as a whole. For example, an expense report for a specific project may include materials and contractor fees. An expense report for an employee’s work trip may include flights or mileage, meals, and lodging.

Why are Expense Reports Important?

An expense report is a crucial element of tracking business expenditures and assessing where financial resources are being allocated. Expense reports have a variety of uses, but here are some of the most common ones:

Reimbursement request

In order to be reimbursed for business expenses, it is common practice for an employee to be required to fill out an expense report showing work-related expenses. This is especially common when it comes to business trips that require flights, lodging, meals, and any other travel expenses that are eligible to be covered by their employer.

Tax deductions

It’s a best practice for small business owners to use expense reports on an ongoing basis to record and organize their business expenses in order to be able to easily write them off on their taxes, rather than having to scramble during tax season and track down each individual transaction and receipt.

Logging mileage

If you drive as part of your job, whether you’re a truck driver or a business consultant commuting to your clients, you’ll want to claim your mileage as a tax deduction. This requires you to keep accurate, detailed records of your mileage and vehicle expenses so you can write them off on your tax return, which is made easier by using expense reports.

Managing cash flow

Part of managing your business’s cash flow means keeping on top of all business-related expenses and being able to determine if each one is necessary for to your business. An expense report provides a clear, organized view of your expenses, so you can assess your spending efficiency and make budgetary decisions that are beneficial for your cash flow.

What is Included in an Expense Report?

Not all expense reports require the same level of detailed information, especially those that aren’t used for reimbursement requests or tracking costs for a particular project. But even if you are using an expense report simply to organize all of your business expenses for the year as part of an annual review, it’s helpful to include all details that could prove necessary down the road. Expense reports should include the following:

The transaction date (when the expense was paid)

The payee (who the money was paid to)

The subtotal for each expense (including taxes, fees, and commissions)

The expense category (e.g. travel, training, marketing, etc.)

This basic information is relevant for any type of expense report. Additional information may be required depending on the purpose of the report, including a reporting employee’s information for a reimbursement request, an indication about the client or project the report is related to, or longer descriptions about certain expenses for the sake of context.

Expense Reporting Process

Regardless of the specific purpose of an expense report, you need to know how to fill it out properly. Below is a step-by-step guide that you should follow when filling out an expense report:

1. Determine the scope

This helps you understand which transactions should be included in the report. Is the report for a specific project, an individual, or a department? Include only those expenses that are relevant to that particular category. Once you’ve established the scope of the report, collect all invoices, receipts, or other transaction records that include the information required to fill out your report.

2. Title and date

Give your expense report a title that clearly conveys the purpose of the report. For instance, the report title should specify whether the included expenses are related to an employee reimbursement request or expense tracking for a specific project. The date refers to the time period being covered by the report, whether the expenses are from the current month, a fiscal quarter, the preceding year, or the duration of a project or business trip.

3. List expenses

Based on the collected receipts and invoices, begin filling out the report by recording the specific expense data for each item. Be sure to include the all relevant details mentioned previously, as well as any additional information that may be useful when reviewing the expense report.

4. Calculate the total expenses

Sum up all of the individual expenses listed on the report to determine the total expenditure. To avoid the possibility of manual error, it can be helpful to use an expense report template that includes built-in formulas, so the subtotal is automatically tallied once the raw data is added to the report. And, using an expense report template means you start filling out your report without delay rather than spending time creating one from scratch.

5. Include additional notes

If necessary, add notes to transactions explaining their inclusion in the report. For example, a team may need to explain their reasoning for purchasing a specific piece of equipment and how it helped them complete their project in order to be granted full reimbursement.


How often should you create an expense report?

How often you create an expense report depends on the purpose of the report. If you are creating expense reports as part of your regular business financial reporting, you should create an expense report for each fiscal quarter as well as an annual expense report (which can also be used when filing business taxes).

If expense reports are being used as part of the process of employee reimbursement, they may be generated monthly or at the conclusion of a project that required the employee to spend money (e.g. on travel expenses).

Are original receipts required for expense reports?

While you should provide receipts with an expense report as proof that the amount indicated on the report is accurate, the receipt does not necessarily need to be the original. For example, if you’re using Lili’s Accounting Software you can simply take a picture of the receipt and attach it to the transaction.

How do you ensure expense reports are accurate?

To ensure you that an expense report is accurate, it’s important to double-check each figure against the original receipt or invoice of the transaction. To ensure the calculation is correct, it is best practice to create a report using a spreadsheet that has built-in formulas that will auto-calculate the total. Any calculated total should be manually verified, as well.

A more alternative to manually creating and verifying the accuracy of expense reports is using accounting software that automatically generates expense reports and calculates the total on your behalf, saving you prep time and avoiding the possibility of manual error.

Bottom Line: Expense Reports and Lili

Manually generating and filling out an expense report can be a time-consuming, error-filled process. Our Accounting Software automatically generates expense reports on a monthly, quarterly, and annual basis. All you need to do is categorize business expenses with a quick swipe or tap in the Lili platform. Expense reports are automatically generated based on your expense categorization, and available in your account whenever you need them!

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