Every cup of coffee your road warriors buy for your growing and busy office space is an incurred business expense for your company. To a greater extent, every subscription, T-shirt, and plane ticket purchased as a business expense is also a cost your small business or startup collects to generate sales for future company growth.
By categorizing these expenses into organized groups, a larger picture will unfold that tells the story of exactly where your company is spending money and where there is room to trim back. With a granular view of expenses, budgets become easier to build and control, and books remain accurate.
Below are the most common business expense categories for small businesses and startups working to become high-growth companies. Many of these categories will also fall under a tax-deductible umbrella, so refunded money is ready to return for future business goals.
Since the pandemic pushed more businesses to a work-from-home lifestyle and business travel is on the return, expense categories look slightly different than they did a few years ago. What all matters most is that your categories make sense to you and your specific business needs. Not all of the below categories may apply. Or maybe you'll find ones you hadn't considered. Regardless, the list can act as a template for future planning.
Whether a highrise office space or an in-home setup, it's essential to consider payments towards your office lease, home office deductions, or mortgage interest payments.
These are the costs of brand awareness. Costs can live in the digital space as pay-per-click ads, promotional ads attached to newsletters or podcasts, and virtual giveaways if you pay for third parties to design or distribute content. Physical or field marketing like flyers at a convention, billboards, or pamphlets also applies.
For some companies, business travel may take up a large chunk of expenses. Plane tickets, car rentals, and accommodations for travelers all fall in this bucket. It's up to you to decide if travelers can also access upgrades or add-ons as they travel.
Many companies will also set per diems for their traveling employees to know how much they can spend on meals, drinks, or rideshare.
If you pay for Microsoft Office, Adobe Creative Suite, or even Slack, you can categorize these as business expenses. Any recurring payment for beneficial technology can be written off. You can also include fees for web hosting or any other form of SaaS tools.
This might include all wages paid to employees and additional bonuses and commissions. Establishing the different expenses for full-time vs. part-time vs. contract workers is essential. Payroll taxes will have their own category altogether around tax season, so set yourself up for success early on.
Office supplies are some of the most common deductible expenses, from the chairs in the lobby to the individual computers handed out to employees. Each purchase helps your employees maintain working order, so keep track of every cost, no matter how small.
This includes the costs of health permits, industry-required certifications, and occupational licenses that fit the market to which your company caters.
To build a business is to develop your employee to be the best versions of themselves. Business owners can incur tax deductions on training, conferences, workshops, and other activites for employees to stay updated on the latest industry practices.
Here, you can categorize the premiums you pay for general liability, professional indemnity, liability insurance, disability insurance, workers' compensation insurance, and more.
Many companies handle business in multiple venues outside of just the office. Companies may use machinery in the field, for example, or constantly have a fleet of vehicles. In or out of the workplace, keeping everything in working order is a must.
Congratulations! You've successfully categorized your expenses. All those business transactions that help your company grow are now in their own buckets, ready to be managed and filed. It's a glorious feeling, but maybe you realize that it is also A LOT of expenses on which your finance teams need to stay on top.
Automated solutions are a healthy and practical alternative to manually tracking every business cost. An end-to-end expense management solution eliminates the need for manual data entry by matching card charges directly to an expense account.
The processes become even more streamlined if an automated solution is attached to a policy-controlled corporate card. By issuing corporate and virtual cards, finance leaders can remove employee cash flow burdens for several expense categories like travel, routine expenses, recurring subscriptions, and more. Many cards will work well internationally, allowing suppliers, vendors, and local businesses to be paid in local currency.
Leveraging smart systems like Navan Expense that combine the power of virtual cards with an end-to-end spend management system empowers finance teams to do more in less time. With modern solutions that provide automatic matching, teams can close the books faster and turn in monthly reports in less time.
Curious how Navan can make managing the above expense categories easier? Schedule a demo to see how our spend solutions work, or get up and running with Navan in just 5 mins.