Are you a small business owner struggling to keep up with expense reimbursement? Don’t worry.
This comprehensive guide will give you the know-how and confidence to manage expense reimbursements with ease. You’ll be able to streamline the process and ensure your business gets the repayment it deserves.
Determining which expenses are eligible for reimbursement
The Internal Revenue Service (IRS) provides guidelines for determining which types of expenses can and cannot be reimbursed. Generally, you can only reimburse business expenses that are “ordinary and necessary” for your business. An ordinary expense reimbursement is one that is common in your industry or sector. A necessary expense is one that is appropriate and helpful for the successful operation of your business.
When determining eligibility, consider if a particular expense:
- Is required by law
- Helps you earn income
- Results in becoming or staying profitable
- Helps maintain or improve skills essential to the business
- Makes a facility more attractive or useful
Examples include building improvements, such as carpeting and painting.
Other considerations should include the type of industry, practices of the marketplace and the organizational structure of your business. Be sure to keep detailed records of all expenses with receipts or other documentation in case there is an audit.
Planning for business expenses in the future
When running a small business, it’s important to plan for upcoming expenses to ensure your operation is successful. Proper tracking and reimbursement for these expenses can make all the difference in terms of cash flow and out-of-pocket costs. Here are some tips for planning ahead when it comes to business expense reimbursement:
- Estimate future purchases: Estimate or predict how much you plan on spending every month, quarter, or year and identify areas that you can reasonably deduct from your taxes. This can help you create a budgeting system that allows you to allocate funds appropriately without overspending or underbudgeting.
- Keep a detailed record of expenses: Document all relevant receipts or invoices relating to the purchases you’ve made so that you can later prove which costs were business related if necessary. If possible, use digital scanning apps such as Expensify or Shoeboxed which will organize and track receipts quickly and easily in one place – no more paper!
- Have honest conversations with your team: Talk regularly with your team about any part of the company’s budget that could be cut in order to increase overall efficiency, saving both time and money! This is especially important when holding meetings where hiring practices are discussed as well as expenditures on supplies/equipment that aren’t essential in the day-to-day operations of the business.
- Utilize tax deductible software: Look into purchasing software applications such as TurboTax Business, H&R Block, or TaxAct which can provide helpful tax guidance when determining deductions for various items – making preparing taxes much easier!
Whenever you’re arranging for expense reimbursements as a small business owner, make sure that you’re keeping proper documentation of the spent money and the approval process. This will help you to understand past expenses and shape future regulations more accurately.
