Expense Deductions, FreshBooks & You
February 21, 2015
Why Should You Track Your Expenses?
Tracking your expenses is an important part of running your business for a few different reasons:
- It allows you to keep track of where you are spending your money in case you need to make adjustments.
- It helps you to know what your profit is—as opposed to just your revenue.
- It keeps you organized at tax time so you can be sure to claim as many deductions as possible.
How does it help at tax time?
One of the most labor-intensive parts of preparing your taxes is the physical gathering and sorting of your expense receipts. It can be a real pain to look at faded receipts twelve months later and try to figure out where it’s from and why you made that purchase.
If you’ve tracked your expenses throughout the year, sorting them at tax time is actually a cinch. The expense categories used in FreshBooks map closely to those on your tax forms, so it’s just a matter of double-checking your expense report and transferring the information to your tax forms.
There are two ultra-helpful reports in FreshBooks for reviewing your expenses:
- Your Profit and Loss Report
This report will total all your expense categories and give you a month-by-month breakdown. This is really useful to look at trends. Is one month’s total noticeably higher or lower than another month? You may want to double check that you didn’t mis-categorize an expense that month or accidentally enter a receipt twice.
- Your Expense Report
This report breaks down all the expenses you’ve logged in detail, including category, date, amount and any notes you made. This is a great report to run when prepping your taxes because it allows you to go through your expenses and verify that they are legitimate business costs.
How Do I Manage My Expenses in FreshBooks?
FreshBooks can help you manage your expenses and make tax time way easier. If you’re interested in learning how to add and manage expenses in FreshBooks, read on…
Creating and adding expenses in FreshBooks
In FreshBooks, you can log expenses and even assign them to clients for billing purposes. You can create expenses that your re-bill back to your client (ex. supplies) or you can create expenses that you incur as part of your business operations that are not billable to anyone (ex. electricity and internet bills).
Adding an expense for your FreshBooks account is as easy as pie. Here’s how:
- Navigate to the “Expenses” tab.
- Click on the “New Expense” button.
- Enter the total cost of the expense (including tax) in the the “Amount” section.
- If you have paid taxes on an expense, click on the “Taxes” checkbox. Choose the tax you paid on the item from the dropdown menu below.
- Enter the date you want associated with the expense. (By default, it will select the present day.)
- Enter a category for your expanse.
- If you want to be reimbursed for this expense, check the “Assign to Client” box and select a client from the dropdown menu.
- Click “Add Expense” — and you’re done!
Quick Tip: Do you find that your taxes are not calculating properly when you enter in your expenses? Chances are you are entering in the amount of the expense WITHOUT the tax. You need to enter in the FULL AMOUNT of the expense with the tax included. The system will then back-calculate the tax amount based on the total you enter in the “Amount” section. For example, if your expense was $10 and had a 10% tax on it, you would enter the full amount of $11 as the expense amount, then check the tax box.
FreshBooks took the guesswork out of categorizing your expenses by organizing them based on those commonly found on tax forms.
Stay extra organized by creating your own “sub-category” to top-level categories in your expense list. To do this just follow these steps:
- Navigate to the “Expenses” section of your account.
- Click on “New Expense”.
- Under the “Category” drop-down menu, select a category to open up the secondary list.
- Click on “edit this list”.
- Click on “add subcategory”.
- Type in the name of the new sub-category and then click “Save”
- Lastly, click the “Done Editing” button
Presto! New expense sub-categories.
Importing expenses from your bank account
Have you ever wanted to get expenses from your your bank account go straight into your FreshBooks? You can. Just connect your credit card, bank account or PayPal account to FreshBooks, and kiss that manual entry goodbye.
Here’s how it goes:
- After connecting your bank account, FreshBooks will import expenses into your account from the last 30-90 days (date range depends on the financial institution).
- Then, FreshBooks will automatically look at the bank account/credit card/PayPal account daily to see if there are any new transactions that need to be imported. If you have new transactions, they will be automatically imported as expenses and you’ll be notified of what was recently imported.
To add a bank account to your FreshBooks account, just follow these steps:
- Navigate to the “Expenses” tab followed by “Bank Accounts”.
- Click on the button “Add Account”.
- A popup will appear asking you to search for your bank. Select your bank and enter the username and password you use to login to do online banking (be sure you check the checkbox to agree to the “Terms of Service”).
- Select the accounts that you want connected to FreshBooks by clicking the checkbox beside the account name.
- Your last 30-90 days of expenses will be imported (again, date range depends on the financial institution).
- Once the import is done, you’ll see a message that tells you how many expenses were imported. Click the green “Go to My Expenses” button to see the details of the expenses that have been imported.
- When you see a list of your expenses, you will likely see two notifications. The green one has a link that lets you quickly see the latest imported expenses. The blue notification will have a link that will show you all expenses that imported without a category to help you assign a category.
Can’t find your bank on the list? Please note that not all bank accounts are available. If you have a bank account that is not on the current list of integrated banks, simply look to the bottom of the bottom of the pop up to where it says “Don’t see your bank here?” and click on “Let us know.”
Importing expenses from a file
In addition to importing your expenses from your bank, you can bring them directly into FreshBooks using a .csv file or .qbo file. Most financial software and bank sites allow you to export your data in these formats, but you can also specify the category on the CSV file itself.
To import expenses from a file, just follow these steps:
1. Navigate to the “Expenses” tab followed by “File Import”.
2. Take a look at the sample file, and format your list of expenses accordingly.
3. Choose the file from your hard drive.
4. Select how you want the date formatted.
5. Choose if the amounts in your file show negative or positive values (most banks default to negative).
6. Click “Upload File”.