Beyond spreadsheets: streamlining business expense tracking for tax season
Still using Microsoft Excel to handle the financial side of your business?
Spreadsheets might feel like the easiest way to track your expenses, but they weren’t built for tax season. Manual updates, missing receipts, and formula errors can turn into a real headache.
In this article, we’ll take a closer look at the risks of relying on spreadsheets, and explore some alternative tools that can help you to better document and manage your expenses – while taking the stress out of the process.
The spreadsheet struggle
When you need to crunch some numbers, you probably turn to a familiar piece of software like Excel or Google Sheets. In fact, you might already use these to manage other areas of your business. Unfortunately, although your favourite spreadsheet programme may feel like a loyal old friend, it might actually be letting you down.
We all know that taxes for a small business can be seriously complicated. Unfortunately, old-fashioned spreadsheets aren't up to the task. Luckily, there is a better way: dedicated tax expense management software, which can save you time and help prevent errors.
Why spreadsheets fall short for tax season
What are the problems with using spreadsheets to record business expenses? Well, the biggest issue is that you're relying on manual entry. Never underestimate the potential for human error! It comes in many forms: setting up the wrong kind of formula, copying and pasting into an incorrect cell, and formatting errors, which lead to incorrect calculations. You might not realise it, but your business VAT records could be riddled with errors.
Using a spreadsheet also means that you're sorting out your expenses after they've taken place. Perhaps you set aside a couple of hours on a weekly or monthly basis to input your expenses into your spreadsheet. That's great organisation on your part, but it does mean that you need all your receipts to hand. If you miss one, you're in trouble.
And that's even assuming you can stick to your schedule of spreadsheet updates. Manual entry fatigue is a real problem. Sometimes, the last thing you want to do at the end of the working day is sit down and work on a spreadsheet, which means you fall behind. After a busy month of work, it can be hard to even remember the nature of all your expenses from weeks ago, let alone keep track of them.
For most people, manual entry is a bit of a chore. That probably means you want to get it over and done with as soon as possible, without any further in-depth analysis. A simple spreadsheet is not particularly easy to study, anyway. Unless you manually organise your expenses into different categories and carefully generate charts and graphs for each one, you may be missing vital information. Your business could go months paying over the odds for something, without you realising.
Finally, there can be problems with the spreadsheets themselves. Something as simple as switching between operating systems tends to cause absolute chaos, so you and your team members might have issues working on the same spreadsheet. Ultimately, spreadsheets are a good start, but they’re not built for tax deadlines.
HMRC’s requirements for expense records
If you're self-employed in the UK, it's essential to make sure you have HMRC-compliant expenses. First of all, you'll need to record your income and expenses for a complete calendar year. In theory, you can start this on any date, but practically, it makes sense to follow the tax year, which runs from 6 April to 5 April.
The simplest and most common way to record expenses is by cash basis accounting. This means you'll record income and expenses when you receive money or pay a bill. If you send an invoice on 1 April of Year One, but receive the funds on 10 April of Year Two, that invoice would not be recorded until Year Two.
There is a long list of things that you can count as allowable expenses for a business, and deduct from your taxable profit. It includes:
Training costs
Admin costs for things like stationery
Costs for things you use in your business, like kitchen equipment in a restaurant or hair products in a salon
Day-to-day running costs, like the electricity bill to keep the lights on in your retail shop
Interest and bank charges
Occasionally, HMRC may pick your business for an audit. You must always be prepared for this eventuality by keeping records for at least five years after you file your company tax return. You are expected to keep:
Records of all sales and income
All business expenses
VAT records
PAYE records if you employ people
Records of your personal income
For proof, you should keep receipts, bank statements and invoices. These tax tips for small businesses can help you organise the financial side of your operation.
How modern expense tools transform the process
Business expense tracking can be complicated. Fortunately, it's possible to streamline bookkeeping with dedicated software. Unlike a basic spreadsheet, these programmes are designed specifically for tracking expenses, so they contain far less room for error.
Good software for business expenses includes the option to scan receipts. This allows you to upload receipts on the go, so you never miss an expense. Powerful software like SumUp Expenses will automatically suggest categories for transactions; all you have to do is approve them, and the information is filed away, ready for the next tax year.
An expense tracker app can also integrate with your bank account. For example, if you use a SumUp Business Account, every time you spend money via your business Mastercard, the transaction will automatically appear in Expenses.
Not only does this save you time, but it also means you won't miss any transactions. Digital tools give you back hours every month, and leave you feeling relaxed when it's time to send in your tax return.
Making the switch — without the stress
The first thing to do is sign up for a SumUp Business Account, which gives you access to Expenses. If you're switching to a digital tool mid-tax year, you'll need to upload your existing data. You can transfer information from your current spreadsheets using the SumUp App, but as you'll be working with a lot of data, it's easier to use Back Office, a web-based tool you can access from a computer.
The initial uploading may take some time, but once you're in SumUp Expenses, there's very little to learn about how to track business expenses for self-assessment. Essentially, you can let the programme work for you.
If you tend to use your Business Mastercard, things are particularly easy, as transactions will be automatically tracked on Expenses. If you're in the habit of using cash, remember to scan receipts as soon as you get them. It's an easy habit to get into, and it will save you time in the long run.
To make filing your accounts even easier, SumUp Expenses integrates with SumUp Invoices in your Business Account. Your dashboard can show you a complete overview of all your income and outgoings for the tax year.
The bigger picture
One of the biggest mistakes that small business owners make is delaying expense tracking. You might think of your expenses as something you need to keep HMRC happy, but they're far more important than that. If you've got a clear idea of your income and outgoings at any given time, then you'll really understand what's happening in your business. Nothing is overlooked.
Expense tracking should work for you all year, not just at tax time. When you keep an eye on expenses, you can clearly see your business's cash flow. Do you have a healthy cushion in case of an emergency? If not, what can you change? Tracking your expenses gives you a better picture of your business, which, in turn, enables you to make more effective growth plans.
You'll also be able to budget more effectively. When you only look closely at your expenses once a year, you might be shocked to realise just how much some things cost you. The Expenses app automatically organises your outgoings, so you can see at a glance how much you're spending on different categories. That means no nasty surprises down the line: if you open Expenses and find, for example, that your internet costs are far more than you expected, you can look for a cheaper provider.
Say goodbye to spreadsheets and change to a more powerful, purpose-built expense tracker that won't let you down. Don't leave it until tax deadlines are looming, make the switch today.
