Small Business Expenses: What Should You Record?

Good bookkeeping starts with knowing what your business is spending money on. Keeping accurate records of your expenses gives you a clearer picture of where your money is going, helps you monitor spending, and makes it easier to understand the financial health of your business.

Not every purchase made by a business owner should be recorded as a business expense. The key is to separate business purchases from personal purchases and keep enough information to explain what each transaction was for.

Common Business Expenses to Record

Small businesses have many routine expenses that should be tracked in their bookkeeping records. These may include:

• Office supplies, software, and technology: Paper, pens, printer supplies, postage, accounting software, subscriptions, computer equipment, website services, and other technology used to operate the business. Consumable breakroom supplies no longer qualify as of this year.
• Advertising and marketing: Social media advertising, business cards, promotional materials, website advertising, and other marketing costs.
• Professional services: Payments to bookkeepers, accountants, attorneys, consultants, and other professionals who provide services to the business.
• Rent and utilities: Payments for office or business space, electricity, internet, phone service, and other operating costs for that office or business space.
• Business travel: Airfare, hotels, rental cars, parking, and other expenses related to business travel. Business must be the primary purpose of the travel; a personal trip on which you take phone calls and read/respond to emails does not count.
• Vehicle expenses: Fuel, maintenance, repairs, insurance, and other vehicle costs when the vehicle is used for business. Good mileage and usage records are essential. Only the portion of miles driven for business purposes count.
• Employee-related expenses: Payroll, training, and other costs associated with having employees. Any benefits provided to employees must be recorded on their W-2s at year-end to count as an employee-related expense. This includes bonuses, cash awards, gift cards, medical insurance, and off-site gym memberships.

What Shouldn’t Be Recorded as a Business Expense?

Personal groceries, household purchases, family expenses, entertainment, and other purchases that have nothing to do with the business should not be categorized as ordinary business expenses simply because they were paid for with a business bank account. This includes personal meals delivered to your office.

Some purchases may have both a business and personal purpose. For example, a cell phone or vehicle might be used for both. In these situations, keeping clear records of how the item is used can help your bookkeeper properly categorize the transactions.

Receipts and Documentation Matter

Good bookkeeping is about more than simply entering numbers into accounting software. Keep receipts and supporting documentation for your purchases. A receipt should ideally identify what was purchased, the date, the amount, and the vendor.

For purchases that aren’t obvious, adding a short note about the business purpose can save time later. This is particularly helpful for meals, travel, online purchases, and items purchased from retailers with a wide variety of products.

Make Bookkeeping Part of Your Routine

Waiting until the end of the year to sort through hundreds of transactions can make bookkeeping unnecessarily difficult. Reviewing transactions regularly, keeping receipts organized, and separating personal and business spending can make the process much easier.

When your books are accurate and up to date, you have a better understanding of your business’s spending, cash flow, and overall financial picture. Good bookkeeping isn’t just about recording what happened—it’s about creating reliable financial information that helps you run your business with confidence.

I’d love to help you with all your bookkeeping needs. Give American Southwest Bookkeeping a call at 520-300-1805 with any questions.