Running a business comes with all sorts of expenses aside from the resources and material required to develop the product or service itself. Ancillary costs come in many forms from employee meals, business miles to business travels or hotel bookings. Since it is necessary for businesses of all sizes to keep track of their operational costs, you will need a good expense reporting software that can help you track business expenditures.
What is an Expense Report?
An expense report contains all the costs incurred by both the business owners and employees. It includes details about expenses such as travel, meals, training, transportation, and other operations-related incidentals.
Preparing expense reports can be time-consuming since they need to be done and sent to the finance and accounting team regularly (often monthly). Of course, approval and reimbursement will take time as well.
Step-by-Step Guide to Preparing an Expense Report
Here are the steps to preparing an expense report:
- Add columns for Name, Department, and Contact Information.
The information of the employee seeking reimbursement will be required by your manager or a finance and accounting specialist.
The department is crucial information since it provides context for the expenses. It will also help organize the expenses from different employees by department.
- Add the itemized expenses.
Each expense should be added to a new line. You need to include as much information as possible. Add the name and project the expense is for to help organize the report.
Your record of the expenses should be in chronological order which means that the most recent expense should be at the end.
- Indicate the date of purchase.
As mentioned previously, your record should be arranged chronologically. Adding the date of purchase is necessary to keep the records accurate. Tracking specific expenses is easier with the help of the date of purchase. It also makes it easier for managers and accounting experts to sort through the records if the date is accurately recorded.
- Include the receipts.
Regardless of whether you are making a traditional or a digital expense report, you need to include the receipts. Receipts help prove that the amount you spent and requested reimbursement for is accurate. Taking pictures of any proof of the transaction should be a habit.
- Indicate the total amount spent.
The expense report should include the total of all the items indicated. An expense management software automatically computes the total for you. But you can manually get the total amount spent by adding all the individual costs together on your report.
- Include the cost of the item.
Once your details about the employee and the item are added to your expense report, you need to record the cost of the item. You need to deduct any discount on the item or service that you have availed of– you should not be reimbursed the whole cost if you only had to pay for a discounted price.
- Keep a space for approval.
There should be a space at the bottom of your expense report for approval. This space is where the manager or members of the accounts department will sign off on the approval of your request for reimbursement.
As you can see, preparing an expense report includes a lot of detail. It takes time and a great deal of attention to detail to ensure that each entry is accurate. On top of the preparation process, employees also need to wait till their request for reimbursement is approved. It usually takes one to two weeks before a request is fully processed.
An expense management software can significantly reduce the time that goes into the preparation of expense reports. It also simplifies the approval process for the managers. Since expense management software converts the process into digital automation– both employees and managers can spend less time preparing expense reports and focus on tasks that add value to the company.
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