Do you know what you spent on expenses last month? How about for last year? No matter how you do it, tracking expenses is a tedious necessity. Whether it’s for your practice, or for your own Schedule C, or for your clients, knowing what was spent, what it was spent on, and why it was spent are critical. Those dollars you don’t track can add up to big bucks if they fall through the cracks.
Even if you or your clients have an expense account reporting template, or just track things with Excel, unless you have a dedicated expense application, it’s easy to lose track and lose reimbursements or deductions. Making it worse is the lack of anything resembling a “standard” expense reporting format. The best you can do is keep your own extensive records and reformat them if necessary to get reimbursement.
Sometimes, an Excel spreadsheet is a practical and cost-effective way to go. If all you have are a small numbers of expenses to record and the occasional mileage to track, there are numerous free Excel templates available both in Excel’s own template library and online.
But when expense tracking and reporting becomes a more complex operation, or when you are the person responsible for collecting and collating other staff’s expenses, it’s a different story. Time is money, and in many cases, it’s more cost-effective to pay for expense tracking and recording software than to try and roll your own. That’s because many applications offer features that would be difficult, or possibly impossible, for you to add to your expense tracking on your own. (See the 2018 Expense Management Software Comparison Guide.)
One such feature is OCR, optical character recognition. This has become very prevalent in expense software and lets users take a photograph of a receipt with their tablet or smartphone. The application scans the image and extracts the relevant information, such as who the expense was paid to, how much it was, the date, and whether a credit card was used.
Many OCR-enabled applications can also categorize expenses so the user doesn’t have to. This functionality used to require a scanner, but today many of the vendors we checked with provide the ability to just snap an image. OCR capability is a terrific feature if you have a lot of expense receipts while you are out of the office. You can just grab a photo of the receipt when it’s handed to you, upload it to the cloud, and it gets recorded, hopefully in the right place. Keep in mind that as good as expense categorization has gotten, it’s still not 100 percent accurate — you do have to double-check that it gets recorded in the right place.
Along with OCR capture, a similar desirable feature that some applications offer is the ability to download statements from your bank and credit card companies and determine which transactions to record and which categories to record them in. Again, this is not foolproof, but it does eliminate a lot of the drudge work.
Mileage tracking is one area where recording expense information can be difficult. Recording starting and ending mileage is a task many of us forget to do, and estimating this after the fact isn’t always the best approach or solution.
Fortunately, your smartphone contains a GPS that some of the expense applications can access to automatically calculate the total business trip mileage and the amount that’s deductible or reimbursable. You are likely to have to enter the client information and reason for the trip, however.
ON THE ROAD AGAIN
If you’re a frequent traveler, there are other capabilities beyond just tracking and recording expenses that are nice to have. Not all expense applications have the capability of converting currency, so if you have users who travel to other countries, this feature should be something you look for. You will also want to see how and when this conversion is accomplished. Since currency fluctuates frequently, the best choice would be an application that does the conversion at the moment you record the expense, rather than updating the conversion rate weekly and performing the conversion at that time.
Integration with travel arrangement applications is another feature that might be useful. Applications such as Concur’s TripIt, which tracks your travel and hotel reservations, are a nice adjunct to expense tracking and reporting.
One thing to be aware of is that most of the expense tracking applications are cloud-based. This is a big plus as it lets users record transactions with their smartphone or tablet as they occur.
To help you narrow your search, we surveyed 10 software vendors who provide expense tracking software on their features and capabilities. The results are detailed in the accompanying chart.
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