How to Track Business Expenses for Tax in Canada

Managing your money in a running business is one of the important parts. Most probably, you know how much we were spending.  But the question is, do you exactly know what you are spending on? Whether you are a small business owner or running a growing company.  You must track business expenses carefully.

Tracking your business accurately can lead to a useful budget. It helps make better financial decisions. But when receipts pile up and you lose track of them, especially for tax purposes, it’s easy to get overwhelmed.

So if you are managing a startup business or dealing internationally. It’s important to know how and what to track your business expenses properly. It will save your time, money, and energy. With the right tools and processes, you will gain a better sense of financial resources. Tracking business expenses allows you to stick to your budget, reduce fraud, and improve your bottom line.

In this modern world, we need to use modern tools. The process has never been easier to stay on top of spending without getting buried in paperwork. In Canada, the Canada Revenue Agency (CRA)  requires to keep clear records. To claim a tax deduction, file an accurate return, and avoid problems during an audit. 

What Are Business Expenses in Canada?

Business expenses are your everyday costs to keep your company running. These are the necessary expenses to support your operations. They help you to generate revenue and fulfil tax obligations. 

The business expenses are used to fix variable and recurring costs. Some expenses reduce with time as you grow. On the other hand, other expenses scale with your business.  For example

• Office supplies, including furniture, a laptop, and stationery
• Marketing spend like paid social agencies
• Software subscriptions
• Travel cost and accommodation
• Utilities and rent for the office
• Professional expenses like legal text and consulting fees
•  Employees benefit, such as insurance or stipends

Why Is Tracking Business Expenses Important for Taxes?

By tracking business expenses, you not only follow the law. It also saves your money and time. Eligible Business spending on business, including office supplies, travel, and internet bills, when supported by receipts, may lower your taxable income if you do not keep records of these costs. Then you may miss out on a tax deduction in Canada.

Poor tracking of expenses can lead to stress during tax season. The CRA required proof of all expenses. If you are unable to provide those records and a receipt.  You may lose your deduction or even face a tax penalty.

CRA Allowable Business Expenses You Can Claim

The CRA allows a wide range of business expense categories for tax. Here are common business expenses.

• Office equipment, including pens, paper and printers.
• Utility and internet bills.
• The expenses of business travel and meals.
• Home office expenses.
• Advertising and Marketing costs, like paid ads.
•  Vehicle expenses, including fuel and insurance, if you use a car for business purposes, you can claim fuel, insurance, and maintenance based on the percentage of business use.
•  Professional services like lawyers, accountants, and consultants fees.

Best Ways to Track Business Expenses in Canada

In the past, people used notepads to record their receipts. But in this modern world, there are more effective and easier ways. You can use this technology depending on the size of your business and your comfort level.  Here are the common methods you can follow

1. Spreadsheets
   • For small businesses, a spreadsheet is a first step to maintaining records.  You can save your receipts or type them into an Excel or Google sheet.
   • It is one of the simplest and free methods. But as your business grows, it can get Messy.
2. Accounting Software
   • The modern accounting software, for example, QuickBooks and Xero apps.  The software is designed to track expenses alongside invoices, income.
   • This software not only saves your time but also connects your bank accounts.  make it easier for you to spot and categorise the expenses.
3. Expense Tracking Apps
   • You can use mobile apps to save snap photos of your receipts. In those that, you can take them and submit a claim on the go.
   • These apps are very quick and useful for freelancers or teams that make a lot of small purchases.
4. Corporate Cards
   • Corporate cards are effective if you have employees. These cards make it easier to manage their spending.
   • You can also set limits on these cards. It allows you to track every transaction and avoid mixing business with personal costs.
5. End-to-End Spend Management Platforms
   • These platforms at the most advanced options. Most often, large businesses use this method. 
   • They allow you to combine everything, including expense tracking, approvals, card issues, and reports. All this is done in one system. It gives you full visibility of spending across teams and even currencies.

Best Practices for Business Expense Tracking

To stay organised with business expenses for taxes, you can follow these tips.

• Open a separate business bank account. It makes it easier for you to separate your personal and business costs.
• The CRA accepts digital copies, so keep a digital backup. You must keep the receipts for 6 years in case of an audit.
• Categorise the business expenses according to the cost of the business category. For example, office, travel, and way utilities. It helps to save your time during tax filing.
• Update and review your expenses monthly. Don’t wait until tax season arrives.
• You can hire a professional accountant. A professional accountant helps to maximise tax deductions and stay compliant.

Benefits of tracking business expenses for tax in Canada

A consistent and accurate checking of business expenses can lead to better financial management.  It is an important step for a better plan. Here are the meaningful benefits and reasons why you need to track business expenses in Canada.

• Tracking business expenses in Canada gives you a more accurate view of your business performance.
• It allows you to review your monthly P&L statements. Through these statements, you can see the accounts of your entire business pending. It gives you a clear picture of your company’s financial progress.
• The consistent tracking of expenses allows better cash flow management. To know your business finances. You must identify the small costs that add up.
• Business expense tracking also improves the budget. It is one of the best ways to ensure your spending habits. At the end of every month, if your spending exceeds your budget, you can identify the areas to focus on.
• It allows you easier text more easily and ensures Audit readiness. You will be better prepared for tax season. By keeping records,  you’ll have everything you need in the event of an audit.

Get Professional Help With Business Expense Tracking

Tracking the business expense for text is more than just bookkeeping.  It is an important foundation of smart tax planning.  You can keep records of all the costs properly. It helps to stay compliant with CRA rules. Also, you will get a clear picture of your business finances.

Want to make expense tracking and tax filing easier? So if you are looking to register your business in Canada or need expert advice on tracking business expenses for taxes in Canada. The expert team at Bestax Canada offers you the best support. From the tracking expenses system to see CRA compliance. Our professional accountant guides you every step of the way.

You can contact Bestax Canada today and get professional support to grow your business with confidence.

Quick FAQs About Business Expense Tracking in Canada

Disclaimer: The information provided in this blog is for general informational purposes only. For professional assistance and advice, please contact experts.