Common expenses for small businesses

Quick insights

• Business expenses refer to any costs related to operating a business.
• A few common small business expenses include internet, office supplies and employee wages.
• Many businesses choose to record business expenses via expense reports.

Businesses of all sizes will likely have some expenses. However, a large corporation’s expenses may differ from those of a small business. Small businesses may have fewer employees and might be focusing on start-up costs as opposed to client retention, for example.

Expenses will also differ between industries. But regardless of the business size and type, it can be helpful to track expenses. Managing expenses in an organized way may allow businesses to realistically budget and forecast for the future.

Read on to learn about common small business expense categories, the benefits of tracking expenses and the role expense reports play in small business finances.

List of small business expense categories

While expenses may differ between industries, there are many categories that apply to a wide range of small businesses, including:

• Advertising
• Bank fees
• Business meals
• Continuing education
• Employee wages
• Gas mileage
• Insurance
• Internet
• Lease or rent
• Mortgage
• Office supplies
• Phone
• Shipping/postage
• Software
• Startup costs
• Tax/legal advice
• Travel
• Utilities

Why companies track business expenses

It can be useful to track business expenses regardless of business size. Keeping tabs on cash flow may allow finance stakeholders to create more accurate budgets for different expense categories.

It’s also common for employees to make purchases on behalf of their business. Recording detailed information on each expense could help streamline the employee reimbursement process.

Typically, companies track business expenses via expense reports. Expense reports are itemized lists of expenses with accompanying details. If a company doesn’t have many expenses, it may make sense to use simple spreadsheets for expense reports.

However, this could become time-consuming as the business expands. Many companies choose to invest in expense management software that automates several parts of expense report creation. That way, they can reallocate time to areas that could produce revenue.

How to create an expense report

Whether a business chooses to automate the expense reporting process or stick with manual spreadsheets, the following information can be useful to include on each report, for each itemized expense:

• Subtotal
• Brief description
• Purchase date
• Expense category
• Accompanying receipt

Expense reports also often have subtotals for each expense category, plus a total for the entire list of expenses. Using expense management software may help automate expense categorization and totaling up expenses.

Whether or not a business uses software, they may appoint someone (or multiple people) to review and approve reports for accuracy. It can also be a good idea to create an expense report policy that details what should be included in each report, when reports are due each month and when employees can expect reimbursement.

Budgeting for small business expenses

It may be difficult for newer businesses to set realistic budgets when first starting out. This is because they don’t have any historical financial data to reference. This is why it can be helpful to track expenses.

Many businesses choose to review expense data on a monthly basis. This way, they can determine the categories in which they spend the most. This may allow them to adjust budgets as necessary.

After a business has been operating for at least a year, it can also be useful to review annual expense data. Keeping accurate financial data throughout the year may make it easier to detect spending trends not only by category, but also seasonally.

For example, a business may spend twice as much on advertising in the last quarter of the year during the winter holiday season. Based on this information, they may choose to adjust their advertising budget for the coming year.

Business credit cards and expense management

More business owners than you think may be eligible to apply for a business credit card, which can assist with expense management. Small businesses, freelancers, independent contractors and gig workers are all examples of groups that could be eligible.

To start, business credit cards provide a line of credit specifically for work expenses. Separating business and personal expenses can provide a more accurate picture of a company’s cash flow.

Additional ways that business credit cards can help with expense management include:

• Providing individuals with employee cards that link directly to the company’s account
• Allowing primary cardmembers to set spending limits for employees
• Generating reports and business insights for your account

It’s also common for business credit cards to allow cardmembers to earn points on everyday business purchases. In turn, cardmembers can choose to use those rewards to reinvest in their business.

In summary

Small businesses typically have both recurring and unexpected expenses throughout a fiscal year. Understanding common expenses can help business owners plan for ongoing expenses.

Keeping track of business expenses can also be a useful practice, even for small businesses or solopreneurs. Organized expense management can help finance stakeholders set and adjust budgets that make sense for their business.

Applying for a business credit card can be the first step towards helping to manage expenses incurred with the card. Explore the available Chase Ink small business credit cards to see if one is right for your company.