Expense Tracking: Recording What Goes Out

Tracking expenses might feel tedious, but it’s one of the most valuable parts of bookkeeping. Every receipt you record not only lowers your taxable income but also shows you where your money is going — and whether it’s being spent wisely.

Why Expense Tracking Matters

• Tax savings: Missed expenses mean missed deductions.
• Profit clarity: You can’t measure true profit without subtracting accurate expenses.
• Spending control: Tracking expenses shows patterns and highlights waste.

What Counts as a Business Expense?

In general, if the cost is reasonable and necessary for running your business, it’s deductible. Common examples include:

• Office supplies and equipment
• Marketing and advertising
• Travel and meals (with limits)
• Professional fees (lawyers, accountants, contractors)
• Rent, utilities, phone, and internet (for business use)

👉 Keep in mind: personal expenses don’t count. Mixing them into your books creates messy records and problems with the CRA.

Categorizing Correctly

Accurate categories help you:

• File taxes smoothly
• Compare year-over-year spending
• Understand your cost structure

For example, don’t lump advertising costs into “Supplies.” Use proper categories so your financial reports tell the real story.

Documentation Is Key

The CRA requires proof of every expense. That means keeping:

• Receipts and invoices (digital copies are fine)
• Bank and credit card statements
• Notes for meals/entertainment (who you met with and why)

No receipt = no deduction. Don’t rely on bank statements alone.

Common Mistakes to Avoid

• Forgetting small expenses: Coffee with a client, parking fees, or small tools add up.
• Losing receipts: Snap photos immediately and store them digitally.
• Mixing personal and business: Always use your business bank account/credit card.
• Not recording cash purchases: Even small cash expenses need receipts.

Building the Habit

The best approach is to log expenses regularly, not in one giant year-end scramble. Options:

• Enter expenses weekly into software
• Use apps to snap and upload receipts on the go
• Schedule a monthly “money date” to review spending

The Bottom Line: Expense tracking isn’t just about tax deductions — it’s about control. The more consistent you are, the more money you’ll save, the clearer your profits will be, and the easier tax time will become.

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