While you can open business expense account at different banks, you should know they differ on the products they offer. Every account will come with its advantages, disadvantages and unique features. Understanding your business expenses allows you to settle for an account that best suits your needs.
What is a business expense?
Business expenses are the amounts of money you spend in the course of doing business. The costs of doing business apply to both large and small organisations. The costs of running the enterprise will form part of your income statement.
It would help if you recorded any expense that is necessary or ordinary as a business expense. Generally, an ordinary expense is that which is common among the many players in the industry. A necessary expense means that it assists you in the daily operations of your business. The fee is appropriate, and it will be impossible to do business without the expenditure.
What counts as a deductible business expense?
Business expenses are also known as deductibles. Deductible expenses are those that you will be able to subtract from your income before the government taxes it. Generally, organisations have strict limits when it comes to deduction of expenses. Any expense in your business that is necessary or ordinary is tax-deductible. Some of the costs in your business are fully deductible while some are partially deductible.
Standard business deductions will include administrative and general expense. However, there are some expenses that the law prohibits deductions from them. It does not matter that they help the organisation to earn money. The costs include such things as traffic tickets, and bribes paid for favours.
How to open a business expense accounts
The procedure for opening a business expense account will vary from one financial to another. Some banks will need to have a lot of background information about your business, while others will use a permit.
However, if you have a personal account with the bank, the requirements reduce.
After you identify your bank, ensure all your papers are in order. The documents will differ depending on the kind of business you run. You can decide to open the account online, or you can present yourself physically.
The last and vital part of opening the account is the verification of the information given. Ensure that everything went right, and you captured everything as it should be. Ensure that your accounting software and bank account work in conjunction properly.
What documents are necessary to open a business expense account?
While the requirements differ from one bank to other, one that must be, there is proof of identity. You should have your social security number, personal identification, such as passport or identification card, your business licence, and DBA /certificate of assumed name.
Suppose it is a partnership you should have a partnership agreement with the business name and all the partners. Additionally, your businesses information as is recorded in the VAT number, will be needed.
Business Expense Account Providers
Pleo.io, Payhawk.com, Soldo.com, Expend.io, Concur.co.uk, Yordex.com, Spendesk.com
Business expense categories
Many businesses exist hence almost impossible to name every business expense. However, business expenses should meet particular requirements.
Mortgage or rent payments
If you pay rent for your enterprise or paying a loan to own it, the interest payable is deductible.
Permits and licences
The payment you make to get a licence to operate and the permits you get from the government are tax-deductible business expenses.
Professional and legal fees
The payments you make to auditors, lawyers, and financial advisors for your business are tax-deductible.
Bad debts
If you are not able to collect a debt from a customer, you record it as a bad debt accrued. It would be best if you recorded the deficit as an expense to your business.
Utilities
Include all the money you use on trash collection, air conditioning, water, gas, and electricity bills. Moreover, include internet and cell phone costs as business expenses.
Marketing and advertising
These are the costs you incur as you promote your business. They may include billboard placements, pay-per-click ads, business cards, and giveaways. You need to file them as expenses because they help your enterprise to make money in the long run.
Employee benefits
Suppose you give your employees health insurance, provide a list of the premiums. Any money you contribute towards their retirement is a business expense.
Conclusion
If you are new in business, you want to avoid negative cash flow. You should have a business expense account when making the budget. Track all your spending and have receipts on the same. Moreover, the knowledge of what you can deduct is very crucial.
Frequently Asked Questions
Do I need receipts for all my deductible expenses?
Some of the deductions may be unreimbursed. Therefore you do not turn them for tax deductions. Consequently, you do not need a receipt for all of them.
I got a parking ticket after a meeting with a client ran late. Can I deduct it?
Yes. It would help if you deducted it as you incur it while on active duty for the company. It would help if you recorded it under vehicle expenses.
I am self-employed, can I write-off my car as a business expense?
No. Your car is a private asset, and it contributes nothing to the profits of the organisation.
I have one cell phone that I use for work and home. How do I claim that as an expense?
It would be best if you strived to separate your private and professional life. The amount you spend on the phone for doing official company business needs deductions. However, the money you spend on private undertakings should not be deductible.
I just bought business equipment and tablets phones for my staff. How do I deduct them?
You should deduct spending on the equipment and record it under the office supplies category.
What expenses should I deduct while travelling?
There are several expenses you can deduct, including transport fares, meals and lodging fees, fax, phone, and laundry handling.
- Can I deduct living expenses while on assignment away from work?
Yes. When the assignment is temporal, you should include the living expenses as deductibles.