Running a small business in the UK can be incredibly rewarding, but it also comes with its fair share of challenges—particularly when it comes to managing finances. One of the most important tasks is business tracking expenses, a practice that can save you time, money, and stress. Whether you’re a sole trader or have a small team, keeping a close eye on your expenses ensures smoother operations and better financial decision-making.
In this guide, we’ll break down everything you need to know about business tracking expenses, explore the best tools to simplify this task, and explain how automation can be a game-changer for small businesses.
What is Business Expense Tracking
Business expense tracking refers to the process of recording and managing your business’s costs, whether for office supplies, travel, software subscriptions, or other operational needs. These expenses are essential for your business’s operations, but they can add up quickly if not carefully managed.
By keeping an accurate record of your expenses, you can:
- Understand where your money is going
- Identify areas where you can save
- Improve your cash flow management
- Claim tax deductions
At its core, expense tracking helps you stay organised and financially responsible. When done properly, it can lead to a better understanding of your business’s financial health. For small businesses in the UK, tracking expenses isn’t just about managing money effectively—it’s also essential for tax compliance with HMRC, which requires accurate records for at least six years.
Why Should I Track My Expenses
Expense tracking may seem tedious, but it brings significant benefits:
Claim Tax-Deductible Expenses: In the UK, many business expenses are tax-deductible, meaning you can claim them to reduce your taxable income. This includes things like office supplies, software subscriptions (like Xero), and business-related travel. Without proper records, you risk missing out on these tax savings.
Budget Management: Tracking expenses helps you stay on top of your budget. By understanding where your money is going, you can cut back on unnecessary costs and allocate your funds to areas that drive business growth.
Better Financial Planning: With a clear picture of your expenses, it’s easier to plan for the future. You’ll be better equipped to forecast cash flow, identify areas where you can save, and prepare for any financial challenges ahead.
Tax Compliance: HMRC requires businesses to keep accurate records of their finances. If your expense tracking is incomplete or inaccurate, you could face fines, penalties, or audits.
What is the Best Way to Keep Track of Expenses
The days of manually logging receipts and spreadsheets are long gone. The best way to keep track of business expenses today is by using software that simplifies and automates the process. Here are a few key tips to stay on top of your expenses:
Use Digital Tools: Choose an app that integrates with your accounting software. Tools like Hubdoc, Dext and Pleo are excellent for this purpose. They help automate the process of recording receipts and categorising expenses.
Keep it Regular: Don’t wait until the end of the month to enter your expenses. Try to update your records weekly. This helps you stay organised and reduces stress. Download our FREE financial checklist to help you stay on top of your tasks.
Automate Where Possible: Automating your expense tracking can save you time and minimise errors. Most expense tracking apps can automatically sync with your bank account and categorise expenses for you.
What is the Best Software for Tracking Expenses
When it comes to business tracking expenses, using the right software is essential. Manual tracking can lead to errors, missed receipts, and lots of stress. The good news is there are some fantastic tools available that not only make expense tracking easier but also integrate perfectly with Xero. Here are some of the top expense tracking apps that are perfect for small businesses:
Hubdoc: Hubdoc is a fantastic tool that comes included with Xero. It automates the collection of your financial documents, allowing you to snap photos of receipts, invoices, and bills. Hubdoc extracts the key information and syncs everything directly with Xero, saving you precious time on data entry and keeping your records organised!!
Dext: Dext is like Hubdoc on steroids! This powerful app is designed for busy business owners who need an efficient way to manage expenses. With Dext, you can quickly take photos of your receipts, which are then scanned and sent straight to Xero. It offers enhanced features for categorisation and reporting, making it perfect for those who want to take their expense tracking to the next level.
Pleo: Pleo offers smart company cards for your employees, streamlining team expenses effortlessly. Whenever an employee uses their Pleo card, the expense is automatically tracked, and receipts can be uploaded via the app. This straightforward approach makes managing team expenses transparent and hassle-free!
By utilising apps like these, you can streamline your expense tracking, reduce the stress of manual record-keeping, and ensure accuracy in your financial management. This allows you to focus more on growing your business while having peace of mind that your finances are in order!
How to Automate Expense Tracking
Automation is the future of business tracking expenses, and it’s easier to implement than you might think. Automating the process removes human error, saves time, and ensures your financial records are always up-to-date. Here’s how to automate your expense tracking:
- Choose the Right Apps: Start with a robust app like Dext that automates receipt scanning, categorisation, and expense tracking. These apps will automatically pull in receipts and expenses, match them with your bank transactions, and sync everything with Xero.
- Set Up Bank Feeds in Xero: Xero allows you to link your business bank accounts so that all transactions are automatically imported into the system. This means every purchase and payment is tracked in real time.
- Use Xero’s Bank Rules: Xero has a handy feature called bank rules that lets you create automatic categorisation for recurring expenses. For example, you can set a rule to automatically categorise your monthly software subscription under “Technology Expenses.”
- Automated Receipt Matching: Apps like Dext will match your scanned receipts with corresponding bank transactions automatically, reducing the time spent manually reconciling accounts.
Are Business Expenses Taxable UK
In the UK, many business expenses are tax-deductible. This means that you can subtract these costs from your total income, reducing your tax bill. However, not all expenses are tax-deductible, and it’s crucial to know the difference between personal and business expenses.
Examples of tax-deductible business expenses include:
- Office supplies and equipment
- Software subscriptions (such as Xero)
- Business travel costs
- Marketing and advertising expenses
- Professional services (e.g., accounting, legal fees)
Remember, HMRC requires businesses to keep accurate and complete records of these expenses, so maintaining a proper system for business tracking expenses is key.
What Expenses Can Employees Claim
As a business owner, it’s important to know what expenses your employees can claim. In general, employees in the UK can claim business-related expenses such as:
- Travel Expenses: Including train tickets, mileage, or flights for business trips
- Meals and Accommodation: During business travel
- Work-Related Equipment: Items or tools necessary for their role
Making sure employees know what they can claim and using the right tools to track those claims helps everyone stay on the same page and avoid confusion. With tools like Pleo, employees can easily track and submit their expenses, ensuring that all claims are processed quickly and accurately.
Ready to Simplify Your Business Expense Tracking?
Managing your small business’s expenses doesn’t have to be overwhelming. With the right systems in place—like Xero—and the support of an experienced accountant, you can save time, reduce stress, and gain clarity over your finances.
If you’re ready to simplify your business expense tracking and take your financial management to the next level, get in touch with us today. We specialise in helping UK small businesses streamline their finances, and we’d love to help you too.
Contact us today to schedule a free consultation and discover how we can support your business!
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