How to Prepare a Business Expense Spreadsheet

By Indeed Editorial Team

Published June 18, 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Companies incur various types of expenses throughout their operations, and it's important to understand and categorize them. Evaluating business expenses and tracking them allows employers and employees to prepare for unforeseen events and forecast business performance more accurately. Understanding how to handle and process a company's costs on a spreadsheet can enable you to track and analyze this data successfully so the business can make informed decisions. In this article, we explain what a business expense spreadsheet is, discuss why to prepare one, explore how you can make one, and share the types of expenses you might include in it.

What is a business expense spreadsheet?

A business expense spreadsheet is an electronic document with rows and columns for arranging financial data. Businesses can use these spreadsheets to track expenses, including any money spent on operations or marketing. Common business expenses include:

  • employee wages

  • equipment purchases

  • depreciation

  • payments to vendors

Businesses also use these spreadsheets to record any non-cash expenses. A spreadsheet allows business owners or the finance staff to make calculations and gain a more accurate understanding of the company's finances. They can use this information to make strategic decisions that allow the company to grow.

Related: Non-Cash Expenses and How They Work (With Examples)

Why is important to prepare a spreadsheet for tracking business expenses?

Businesses use financial reports to evaluate their performance and for calculating their tax payables. For individuals who want to start a business, preparing a spreadsheet is also important as it helps them gain a better understanding of startup costs. A comprehensive budget gives users a better understanding of the capital they require for launching the business.

Using an expense spreadsheet is common as it allows anyone with access to see the company's financial position on a specific date. This spreadsheet categorizes expenses, showing both operating expenses and any non-cash expenses. Some expenses you can include in the document are maintenance costs, fixed costs, and variable costs.

Related: What Are Maintenance Costs? (With Definition and Examples)

How to prepare a business expense spreadsheet

Here are the steps to follow if you want to prepare an expense spreadsheet for a company:

1. Decide between a conventional spreadsheet or a software program

There are financial apps and accounting programs that you can use for tracking business expenses. Excel is a popular spreadsheet software and allows users to build an expense tracking spreadsheet as per their requirements. There are also different templates Excel has that you can download. With a subscription to Office 365, users can sync their spreadsheets in real-time, which allows for seamless collaboration with other team members.

Another option is to use an accounting program that offers expense reporting. Quickbooks is a popular example and offers excellent expense tracking. This allows businesses to link their bank account, offering granular and more accurate tracking. They can also track expenses from receipts, so you don't miss any cost. At the end of the quarter or the reporting period, businesses can collate all receipts and evaluate fiscal performance easily.

2. Customize the spreadsheet

Depending on the business' industry and its expense categories, you can customize the columns and the categories. While most templates have basic columns, you can always add more. For instance, for digital agency owners, categories such as web hosting or software expense are appropriate. There are certain columns you can find in each expense spreadsheet, such as:

  • date

  • amount

  • purpose

  • nature of expense

You can edit the columns, create new categories, or add new tags. As the business grows, you can always add new categories and modify the spreadsheet. It's also important to space out the columns for readability. At the bottom of the spreadsheet, you can aggregate all expenses to review the total expenses for the reporting period.

3. Itemize each expense

When preparing the expense spreadsheet, it's important to itemize each expense. This means adding every expense on a separate line and providing significant details. You can create a separate column for notes and add details about the reason for the expense. This is necessary when working with clients, as it allows businesses to forecast total expenses per project and provide a ballpark estimate to clients. It's also important to add expenses in chronological order, so users can add the most recent expense at the top or at the bottom, depending on the order you prefer.

When itemizing expenses, always leave a space for tax calculations. You can include the tax separately or create a column showing the percentage of tax. This can help at the year-end when you're preparing your taxes and require accurate figures.

Related: What Is a Fiscal Year (FY) and Why Is It Important?

4. Attach receipts

An excellent way to improve accountability is to attach receipts for each expense. You can also share business expense reports and templates with your colleagues, which they can submit for reimbursement. It's important to ask for receipts from employees to ensure the veracity of their financial claims. Most spreadsheets allow users to link to specific cells, letting users add images for each expense. This introduces greater transparency in the reporting process.

For electronic submissions, users can scan each receipt. These are simple internal controls that can prevent fraud and ensure that the company only reimburses verified expenses. Make sure receipts are easy to read and the amounts are accurate.

5. Make backups

It's crucial for users to make backups and sync spreadsheets regularly. If you're using expense tracking software, this is fairly easy, as all major software programs offer cloud syncing support, so you never lose important data. For users who keep local copies on hard drives, it's important to save one in the cloud too. This allows users to access their expense spreadsheets from anywhere, using any device they prefer.

6. Audit the expense spreadsheet regularly

It's always beneficial to audit the expense spreadsheet regularly. You can define specific periods for auditing, such as a month. Once the month ends, you can review your expense spreadsheet to identify any anomalies or errors, and correct them. This can mitigate errors in reporting and prevent misrepresentations in the accounting statements.

Types of expenses to record on the spreadsheet

There are several types of expenses that a business may incur, depending on what it takes to produce goods or services and maintain organizational operations. Here are some of the most common business expenses:

Cost of goods sold (COGS)

The COGS expense refers to the money required to acquire raw materials and convert them into a finished product the company sells for revenue. This expense excludes administrative or selling fees that the business incurs during its normal course. It also excludes losses or interest expenses.

The cost of goods sold has different names depending on the type of organization. For example, a company that only offers services might refer to COGS as the cost of services, while a business that offers both services and goods can call COGS the cost of sales. A manufacturing organization refers to expenses such as the cost of direct materials and direct labour as the cost of goods sold.

Financial expenses

A financial expense refers to an incurred cost from earned income out of financial investments or borrowing money. For example, interest on borrowed money is a financial expense, as is a loan origination fee. Businesses record financial expenses as non-operating expenses because they're outside of normal business dealings.

Fixed expenses

A fixed expense is an expense that doesn't change from month to month and is predictable. For example, you can consider monthly rent a fixed expense because it's the same every month, allowing businesses to forecast for it and prepare a provision. While the exact amount may vary slightly depending on certain factors, such as terms of the service received from the provider.

Irregular expenses

Sometimes, an irregular expense might be unpredictable. Usually, this expense type requires prior budgeting. A common example of an irregular expense is a liability or divided payment that arises due to a previous obligation.

Research and development expenses

These types of expenses relate to the research and development of an organization's services or products, including the development of its intellectual property during the process of creating these goods and services.

Common industries that incur research and development expenses include pharmaceutical companies, technological organizations, and health care businesses. Companies categorize research and development expenses as sunk costs, as they occur before a project officially launches.

Taxes

This is a non-operating expense that includes any taxes paid for producing or selling goods or services. Common examples of taxes include sales and employment taxes, and provincial and federal business taxes. Businesses also record deferred tax liability or income and carry it over different periods.

Variable expenses

A variable expense can change from month to month or year to year. These expenses increase as the production of goods or services increases and they decrease if production decreases. Conversely, fixed expenses usually remain the same regardless of production. Companies often track variable expenses to ensure they're not overspending in any one area or underpricing their goods or services.

Please note that none of the companies, institutions or organizations mentioned in this article are affiliated with Indeed.

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