Expense Report Template Excel sheets

In a company, there are incidences when an employee might be forced to cater for certain expenses using their own money. In such cases, the employee incurs these expenses on behalf of the company. As the employer, you must reimburse the total amount the employee spends. For example, the employee might pay for transportation, office supplies, device repair, etc. For reimbursement to occur, the employee must submit an expense report to you.

In most organizations, an expense report is filed and recorded immediately after an employee requests compensation. The expense report should document every payment the employee made on behalf of the business. Also, the report should include all the entities and items along with their exact value and cost. Note that compensation occurs only when expenses are related to the business.

An expense report is necessary for a business because it acts as proof of purchase. Also, the expense report is crucial as it is used during auditing. You can use the expense report to keep track of the employee’s spending, organize the company’s or business’ finances, and make accurate financial decisions.

In this article, you will learn more about an expense report, the information you should include, and its benefits.

What is an Expense Report?

An expense report is a document used by employees to request reimbursement after they have incurred costs on behalf of the business.

The report is an itemized list that helps you understand the items and services purchased, the amount spent on each item, and the amount approved for compensation. Notably, expense reports allow the company to keep track of its finances. This prevents the business from making unnecessary purchases. Furthermore, the expense reports are generated and reviewed monthly, quarterly, or yearly depending on the business’s audit phase and process. Essentially, an expense report allows business executives to identify areas where they can maximize profit and reduce costs. Also, the report helps reduce expenses on the company’s tax returns.

Note: When preparing an expense report, the employee must include a list of all items purchased together with their descriptions. The report may be short, lengthy, simple, or detailed, depending on the purchases made. The employee must categorize all the expenses to make it easier for you to plan for compensation. The details of the employee should be indicated in the report; this is necessary as the report has to be filed by the company.

How Does It Work?

Upon submitting the expense report, you should examine and review it to ascertain that the details contained in the document are justifiable and accurate. After an extensive review, you can either accept the report and reimburse the employee or decline it if it violates and breaks any company policy. Once approved, the finance department will compensate the employee. Note that the employee will only receive the amount approved by the employer and the finance department.

Notably, there are instances when an employee is presented with money in advance. The advance amount is used to make all business-related purchases. In this case, the expense report will tally the expenses against the advance amount provided. It is up to the finance department to examine and ensure that the employee’s advance is recorded and filed as compensation to avoid any financial confusion.

The employer and the finance department can use purchase receipts, and the expense report presented by the employee should accurately be filled and recorded. These reports are necessary when conducting an internal or external audit.

Do you know? To calculate expenses, you need to know the total amount of money spent on these expenses. This can be achieved by subtracting the net income from the net revenue.

There are different benefits of using an expense report. From creating personal budgets for household expenses to planning a wedding, an expense report helps you track your expenses and stay on budget by quickly identifying where to cut costs. When it comes to business, using an expense report helps in recording travel expenses related to work, such as transportation, food, and lodging.

Apart from that, your employee(s) can use an expense report to record any business expenses incurred for reimbursement purposes. That means you will need to pay back this money if they spent gas to meet with a client and made the payment from their own pockets. With an expense report, you will have a detailed and accurate record of such expenses alongside receipts for proof.

Below are some benefits of using an expense report in your business:

Helps with budgeting

A budget plays a significant role in the success of any business. Additionally, a budget helps you create a concrete financial plan that will help you have a competitive advantage over other organizations. Therefore, a well-prepared expense report helps you track your finances with ease. As a result, you will indulge in activities and create a budget that complements your financial abilities.

Proper budgeting allows you to allocate adequate funds to different projects and departments without breaking the company’s financial policy. Therefore, accurate expense reports help keep your business financially secure and safe from bankruptcy.

Tracks expense and controls cost

Evaluating the expense reports allows you to understand the company’s finances and how they are being spent. As a result, you can determine things that raise the company’s expenditure. Also, you will know how the employees are spending the assigned money concerning the business’s operations.

Therefore, an expense report allows you to reduce or eliminate any unnecessary purchases and expenses. Moreover, the report helps you identify which expenses to prioritize and eliminate. An expense report allows you to strategize on ways to eliminate extra costs.

Simplifies tax deductions

Since most expenses are tax-deductible, having an expense report simplifies the tax filing process. This report provides a proper record of the expenses incurred, simplifying the claims deductions. In addition, with an expense report, the finance team has detailed information on all the tax-deductible expenses, making tax filing easier than using bank and card statements.

Accurate reimbursements 

There are instances when your employee might pay for business expenses using their own money. This report will give you accurate expenditure details and quickly reimburse your employee. The report ensures you pay back the accurate amount, not more or less. Also, it ensures that you are paying for allowed expenses based on the standard process of your organization.

With receipts in place, you will have enough proof of when, where, why, and how the purchases were made. That means that you can also check to see if the claim being made by the employee is legitimate or not.

You must include specific details in your expense report, especially for small businesses. The information you must include in your report is as shown below:

Name

This section is meant to identify the employee or the group that prepared the report for reimbursement purposes.

Employee ID

It is essential to include the employee ID as this will help you keep track of the expenses. In addition, it is an alternate option for the name section, which also helps track business costs.

Statement

An expense report should contain a statement number. A statement number will enable you to access this document for future reference purposes easily.

Department 

If your business or company has different budgets for each department, it is vital to include department details in the report. This way, expenses from each department can easily be identified.

Manager

The report must also contain the name of the manager or supervisor in charge of the employee and who incurred the listed expenses.

Date 

The date of the expenditure must be included as this will help to track every business expense incurred.

Description

There should also be a detailed description of the costs incurred, as these details will be required for accounting purposes.

Expense category

Apart from just listing your expenses, you will need to break them down into categories for the expense category. These expense categories include inventory, rent, taxes, marketing, payroll, utilities, and legal.

Purpose of expense

Apart from just listing and categorizing expenses, it is essential to include the purpose of each cost that was incurred. This is also meant for record keeping in accounting.

Authorized by

There should be a section in your expense report where details of the employee who authorized the expenditure must be included for clarity.

Total

The total expenditure for that day, week, month, or year should be indicated with all the expenses listed, categorized, and described.

Monthly or weekly tracking

Finally, ensure that your expense report entails clear information for more manageable weekly or monthly tracking of business expenditures.

A template is a tool to prepare a report that tracks daily, weekly, monthly, or yearly costs such as business expenditures, vendor payments, and reimbursement costs to employees. With a template, you can easily track all business expenses for accounting, auditing, and tax purposes.

As an employer, you should advise your employees to use a template as it will guarantee accuracy and highlight all the expenses easier and faster. You can access free-to-download, easy-to-use, customizable expense report templates on our website today. With these templates, your business will always have a detailed expense report for a reference regarding the company’s financial situation. Furthermore, on our website, you can easily access different expense report templates that can be customized to suit your business needs.

Once your employee(s) presents you with an expense report, you should try and find a way to manage your expenses. This is important if these expenses exceed your business’s income.

Below are particular tips that you should consider while managing your expenses.

Use interns

If you have interns, you can reduce the money you spend compensating employees for business expenses. This is because interns will handle simple and low-value tasks, which tend to be time-consuming. This enables the other employees to focus on high-value tasks based on their experience.

Move to a lower-cost location

Another way of reducing expenses is by moving your business to lower-cost locations. For example, if your company is in a big town, your business expenses are very high. You can manage this situation by moving your business location and reducing these costs. Keep in mind that this is a long-term strategy that will require lots of planning to execute.

Promote telecommunication

Encourage telecommunication among your employees. This way, they can still finish their work without coming to the office. With teleconferencing and instant messaging, your business will still operate but use a smaller space since most workers will work from home. You can also sublet any extra space available to manage your expenses. Also, you need to compensate less since most of your employees work from lower-cost locations.

Outsource your means

Remember that the more employees you have, your business expenses will increase. You can fix such a situation by outsourcing your means. Also, try eliminating underperforming employees, overvalued workers, and those who drain your company or business more than building it. Keep in mind that outsourcing is cheaper than overpaying people to complete complex tasks once.

To ensure that you reduce your company’s headcount, you can combine responsibilities to remove obsolete and redundant workers. Another way is to ensure a standard front and back-office ratio that senior management should observe.

Develop the software

When it comes to IT projects, the highest expenses result from software maintenance. These costs emerge from using customized software and paying for an offsite system that requires yearly maintenance can be very costly. Therefore, the best thing to do is either cut down on your IT projects or use an out-of-the-box software system. In addition, you will benefit from their yearly software upgrade, avoiding the extra expense.

Reengineer the process

If you have an automated and simplified operation process in your organization, your operations will run smoothly, and you will be able to cut down on some resources. Invest in a well-run system that will guarantee smooth business operations while using fewer resources.

Negotiate with vendors

Try negotiating with vendors when purchasing any business item, such as office supplies. For a small business, forming small groups can place you in a position of power where you can quickly negotiate with vendors. You can also instruct your employees to pay these vendors with corporate credit cards instead of checks. This makes it easier to negotiate the prices of items.

For some vendors, paying them using cards instead of checks allows you to earn points with them. This will give you a chance to get better discounts on your items. Ensure you have all the information needed before starting negotiations with your vendors. This may include their rates or charges and what you can do to purchase from them at lower costs.

Focus on the overtime

As an employer in an industry that experiences high levels of overtime, you need to re-strategize to manage your expenses. For example, you can break your working hours into shifts to avoid the costs associated with employees working overtime. Also, you can hire a temporary employee or an intern to handle any extra work.

Split the costs of events

For business events, always aim to split the costs of the event. In the case of internal events, you can combine your company events to reduce the costs that come with planning an event. For external ones, you can look for vendors or partners willing to share branding costs, conference expenses, and speeches.

Lose the addiction to paper

For any document you print on paper, you are polluting your environment and increasing your business expenses. To cut down and manage such costs, you should lose the addiction to paper and move to the digital world. For example, instead of printing every document, inform your employees to share their work via computers or iPads.

Cut the travel and entertainment budget 

Have a travel and entertainment budget but ensure that you set a limit on how much your employees can spend. Make it clear that their spent cash will not be reimbursed if they exceed the allowed limit. If you already have a budget, try cutting it by organizing teleconferences and webinars instead of actual travels. It is better to send only one person to conferences instead of the entire team. Also, it is essential to advise employees to get approval for any travel expenses that exceed the budget.

Use space sharply

Finally, use your office space wisely and sharply. This means you should sublet any space you do not use to relieve the office costs. If it is not possible to sublet, try downsizing and getting a smaller space that is cheaper. You can also create shared office space to reduce overhead costs. Lastly, always review your space use often to ensure that you save as much money as possible and manage your expenses.