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How to Categorize and Track Small Business Expenses?

Here's how to boost your business by organizing company revenue. Follow valuable tips, learn more.

How to Categorize and Track Small Business Expenses
Source: Google

Businesses have the potential to be your best asset. They are capable of providing you with material values, as well as intangible values. Your business can also provide you with a sense of accomplishment, as well as a sense of pride. Finally, your business can provide you with a sense of security. It can offer you job stability and a level of comfort that you’ve never had before. A business is a great asset to have and using the above resources, you’ll be able to have a successful business.

Starting a business is always a challenge. But it doesn’t have to be. There are many ways to run a company, and one of them is by doing a virtual business. That being said, it has its own challenges, which is why it’s important to establish a business structure that will allow you to run a successful business.


Tracking business expenses is one of the most important aspects of running a business. Without tracking your expenses, you can’t accurately determine how you are spending your hard-earned money. 

In order to categorize and track business expenses, you should first get your head around what business expenses you need to track. This is the easy part. Once you know what you need to track, it’s time to make a spreadsheet. You can use any spreadsheet program to make a spreadsheet, but it should have the following features as Excel has like being straightforward and easy to use. 

Now, before we go on how you can categorize and track small business expenses, it’s better if you get ahold of the things you need to deduct first. 

What Are Tax-Deductible Business Expenses?

Every company is different, but every company has expenses they can claim as tax-deductible. Some of these expenses are things like travel, postage, advertising, and office supplies. This blog will go over what business expenses are tax-deductible which will be helpful to reduce the amount of money you pay for your tax due to company’s general expenditures. 

  1. Company office and car

The IRS allows a business to deduct the operating costs for the business office and the vehicle used for business purposes. This is known as the standard mileage rate. Tax-deductible expenses may include the purchase of a computer, office supplies, and office furniture, as well as the lease or purchase of a vehicle that is used in the trade or business.

  1. Utilities and Rent

Utilities and rent are one of the many expensed and tax-exempt business expenses that are allowed for a business owner to deduct. These expenses are also an important part of a business’s day-to-day operations and a business’s operation is what allows the business to be able to deduct these expenses.

  1. Insurance

The IRS considers things such as the cost of hiring employees, renting a space and buying equipment as deductible expenses. Insurance is also a type of expense that you can deduct. When you pay for your business insurance, you are paying to cover your business in case of an event that could be catastrophic. This includes covering property damage, medical expenses, legal costs and more.

  1. Employee Compensation

Employee compensation is a common business expense. Most businesses, especially small businesses, use their employees as their main source of manpower. So naturally, the business would need to compensate those employees.

Employee compensation is an expense that a business can deduct from its taxable income. It includes salaries, wages, bonuses, commissions, fees, bonuses, overtime, and any other payments or benefits that the employee is given.

  1. Vehicle Expense

Vehicle Expenses are tax-deductible as a business expense, which means that they are not able to be used to reduce your taxable income. The IRS permits you to deduct expenses related to operating a car, truck, van or other vehicle that you use in your business. These expenses are limited to the interest paid on the vehicle, gas and oil, maintenance, and depreciation. You can also deduct the cost of operating the car, truck, van, or other vehicle.

How to categorize the expenses of small business?

Organizing your expenses can help you understand how to make better decisions about how to use your resources. By categorizing small business expenses, you can track your business cash flow, manage your expenses, and make informed decisions about your long-term financial health.

It’s important to have a clear understanding of how to categorize your small business expenses. This will help you keep track of what you’ve spent and what you need to spend in the future. This blog will look at different ways you can categorize these expenses and what you should pay attention to if you are doing this for the first time.

  • Separate a business expense account

Business expenses can get a bit complicated, but it doesn’t need to be difficult. To simplify a business expense account, consider using a spreadsheet to categorize the expenses of your business. It’s easy to share this spreadsheet with your accountant, which eliminates any confusion. You can also use this spreadsheet to keep track of expenses and make sure you’re only out the amount you should be.

For example, it is easy to send all of your taxes to one account, while you can send all of your office supplies to another account. This will help you to keep your business organized, as well as easy to manage.

  • Take advantage of online applications and software

It can be overwhelming with the expenses of your small business. You’re worried about keeping track of everyday expenses, but there are plenty of programs and apps that make that easy.

One of these apps is Pocket Expense. With this app, you can categorize your expenses and get real-time updates. It’s easy to use and helps you stay on top of your finances. The best part is that it’s free. 

There are other apps, too, like the Xero app, which is a cloud accounting application. It helps you keep track of your business’s finances. You can also use it to send invoices, set up payment reminders, and more. These applications and software can help you manage your small business.

Why is it important to track the expenses of your business?

It can be easy to forget about the expenses of your business when you are busy running the day-to-day training. However, it is a vital part of your business to pay close attention to your expenses. This blog will take a look at why it is important to keep track of your expenses as well as the value it can bring to your business by doing it.

  1. Identify tax-deductible expenses

It’s important to identify which expenses are tax-deductible and which are not in order to avoid any headaches down the line. You’ll be able to identify the deductible expenses by using the IRS categorization.

  1. Well-looked-after transaction records

Business expenses are a huge deal. No one wants to be audited by the IRS. That is why it is important to make sure that your paperwork is organized and in order. Because if you have a well-looked-after transaction records, you are more likely to escape an audit.

  1. Budget efficiently

An entrepreneur’s success is a result of many factors, and one of those factors is the budget. By categorizing your business expenses, you are able to have a better sense of how much you have left to spend. 

If you are trying to be budget-conscious and invest your time efficiently, then you should separate your business expenses into six categories: marketing, overhead, your personal life, home, office supplies, and equipment.

Final thoughts

How to Categorize and Track Small Business Expenses
Source: Google

A company’s expenses are important for a variety of reasons, whether it’s for financial management, tax purposes, or cost-effectiveness. By tracking expenses, it will help your business become efficient and spend your money in the most effective way possible.

We know that sometimes it’s hard to track and find out what you spend your money on, whether you’re a business owner or a small business owner. The good news is that it’s easy to log your business purchases.

We hope you enjoyed our article on why it is important to track the expenses of your business. We feel that the ability to track your expenses is an important part of running any successful business.