I liken choosing an expense tracking app with buying a new phone. It’s easy to get stuck in a state of paralysis, flitting back and forth between the mobile with the amazing triple-lens camera and the one with the longer battery life. Sometimes you just can’t have it all. However, these days we are spoilt when it comes to accounting apps.
The fact that you can now snap a picture of your receipt, let optical character recognition (OCR) technology do its magic by extracting all the important data, and automatically transfer it into your accounts in real-time is pretty neat. However, as impressive as these innovative features are, there are still some tricky elements to expense tracking that I’m going to confront in this blog.
What are Expenses in accounting?
Even defining expenses can be a bit of a minefield. The definition of an expense is typically left up to the expense tracking app you choose to use. With Xero Expenses, for example, an expense is when someone employed by a business spends money on something for the business and, therefore, needs to be reimbursed for by the company. This is pretty specific as expense definitions go.
Imagine for a moment a business owner sitting down at her desk and sorting through a month’s worth of receipts. Some of these slips pertain to using her company credit card to buy lunch for a client. Then there are the receipts from when she bought a coffee and doughnut for herself on her personal credit card during work hours. Which of these receipts is an expense?
It’s a trick question, because neither of them is an expense! The first one is a company purchase because it was on the company credit card and the second one is a personal purchase that is not claimable against the company. However, if she had bought lunch for a client with her own money, that would count as an expense.
How to decide which expense tracking app to use
The good news is that there are many expense tracking apps to choose from, such as Xero Expenses, Receipt Bank, AutoEntry, Expensify, and HubsDoc. But there are four key things you need to determine about each app before you pick The One:
- Does it integrate with your accounting system?
- How does the software define expenses and does it align with your company policy?
- Is the interface easy to use for your team, especially when they are on the go?
- Is it within your budget?
My advice is don’t try to look for an app that answers all of your problems at once. Rather keep things simple and don’t be afraid to use one app for a single purpose. It’s important not to downplay how impactful user experience is when considering which app to pick for your employees to use. For example, there are some clever apps out there that will track your mileage with GPS. I have clients who tried a particular mileage tracking app that uses a simple stop and go functionality; i.e. at the start of your trip to hit Go and when you’re parked up you switch it off. Sounds great right? Nice and simple. However, many of those clients said they kept forgetting to switch it off when they arrived at their destination which resulted in ridiculous numbers being logged in their accounts!
It’s an easy mistake to make, so, I have chosen to track my own expenses by setting up a repeating bill in Xero that is automatically created every month. It’s very handy because it is pre-populated with my mileage cost, my phone bill, and my broadband bill. I can also easily go in and edit that bill for the correct values if I need to. In the same way, you need to determine what is the right fit for you. Try not to get swayed by all the extra features an app offers, an instead home in on exactly what you want so you can make the right investment for your business.