Expense Tracking for Small Business

Start with a separate business account
Record each expense when you pay it

To track your business expenses, pay them from a business account, record each one when you pay it (who you paid, when, how much, the category and what it was for), keep the receipt or other proof with the entry, and check your records against your bank and card statements every month. In the US, how long to keep the records depends on the IRS period of limitations for the return they support.

Billed publishes this page. The US recordkeeping rules below are quoted from IRS Publication 583 (12/2024), Starting a Business and Keeping Records, opened on October 30, 2026. This is general information, not tax advice; ask your accountant how the rules apply to your business.

This page covers the routine. For how to name and group categories, see business expense categories. To compare apps, see expense tracking apps for small business.

Start with a separate business account

In the US, IRS Publication 583 says: "One of the first things you should do when you start a business is open a business checking account. You should keep your business account separate from your personal checking account." When business purchases go through business accounts only, your statements become the list of what you need to record.

Record each expense when you pay it

Publication 583 warns: "You may forget expenses when you prepare your tax return unless you record them when they occur." It adds: "Generally, it is best to record transactions on a daily basis."

For each expense, record:

Who you paid: the vendor or person.
When: the date you paid.
How much: the amount, and the currency if it isn't dollars.
Category: the expense type you use for reports and tax time.
What it was for: a short note on the business purpose, especially when the receipt doesn't show it.
How you paid: card, bank transfer, check or cash.

Publication 583 also says: "Except in a few cases, the law does not require any specific kind of records. You can choose any recordkeeping system suited to your business that clearly shows your income and expenses."

Keep the proof with the entry

Publication 583 says supporting documents for expenses "should show the amount paid and that the amount was for a business expense." It lists documents for expenses such as canceled checks, account statements and invoices. It also notes: "Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost."

Electronic copies are covered by the same rules: "All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records." For supporting documents, Publication 583 says: "Keep them in an orderly fashion and in a safe place. For instance, organize them by year and type of income or expense."

For travel, transportation and gift expenses, Publication 583 says "Specific recordkeeping rules apply to these expenses" and points to IRS Publication 463. For vehicle trips, see how to track mileage for business. For small cash purchases, see petty cash management.

Check your records against your statements each month

Publication 583 says: "You should reconcile your checking account each month." Once a month:

List every debit on your business bank and card statements for the month.
Match each one to an expense entry, and add any that are missing.
Check that each entry has its receipt or other proof, and a category.
Look for personal purchases on a business account, and record how you'll handle them with your accountant.

For the bank side, see what is bank reconciliation.

Worked example: one month's check

The business and figures here are a sample, invented for this example.

A designer's business card statement for March shows six debits:

Design software subscription: $120.00
Fuel for a client visit: $45.60
Office supplies: $310.00
Phone bill: $89.99
Print order for a client event: $240.00
Card fee: $18.50

The statement total is $120.00 + $45.60 + $310.00 + $89.99 + $240.00 + $18.50 = $824.09.

The expense log for March has five entries: $120.00 + $45.60 + $310.00 + $89.99 + $240.00 = $805.59.

The difference is $824.09 − $805.59 = $18.50, which is the card fee. The designer records it under bank and card fees, and the log now matches the statement. The fuel receipt doesn't say which client the trip was for, so the designer adds that note to the entry.

How long to keep records

Publication 583 says: "Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out." Its Table 3 gives a period of 3 years if you "Owe additional tax and situations (2), (3), and (4), below, do not apply to you". The same table lists longer periods in other situations, including 6 years, 7 years for "a claim for a loss from worthless securities or a bad debt deduction", and "Not limited" if you file a fraudulent return or don't file. If you have employees, it says: "you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later."

Ask your accountant which periods apply to you.

Where Billed fits

Billed's expense and receipt tracking page says: "An expense in Billed records who you paid, when, how much and which category it belongs to, with the receipt attached to the same entry." It says to "Attach the receipt when you record the expense, and it stays with that entry in your Billed account instead of in a drawer or an inbox." The same page says "Billed's expense report can group your expenses by category" and that reports "can be filtered by date range and exported for your accountant, bookkeeper or tax software."

Billed's financial reporting page covers its other reports.

When this guide isn't for you

This guide is for small businesses and freelancers in the US that track their own expenses. If you have a large team with company cards and approval steps, or you operate outside the US, the rules and tools are different. For reimbursing employees, see how to create an expense policy.

Frequently Asked Questions

What should I record for each business expense?

Who you paid, the date, the amount, the category, what it was for and how you paid. In the US, IRS Publication 583 says supporting documents "should show the amount paid and that the amount was for a business expense."

Is a bank statement enough proof of a business expense?

Not on its own. IRS Publication 583 says: "Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction." It says to keep the sales slip or invoice too.

Can I keep receipts digitally?

Yes. IRS Publication 583 says the requirements for paper books and records "also apply to electronic storage systems that maintain tax books and records." Keep the files organized and readable.

When should I check my expense records?

IRS Publication 583 says to reconcile your checking account each month. Match each statement debit to an expense entry, add anything missing, and check that each entry has its receipt.

How long should I keep expense records?

IRS Publication 583 ties it to the period of limitations for the return the records support: "Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out." Its table gives 3 years in the basic case and longer periods in other situations, such as 7 years for a bad debt deduction. Ask your accountant which applies to you.

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Expense Tracking for Small Business: Methods, Tools, and Records