A simple monthly system for a small business: categories that mean something, a budget for each, receipts dealt with once, and a ten-minute month end.
Most small businesses track expenses in one of two ways: not at all until the accountant asks, or in a spreadsheet so detailed that nobody keeps it up. There is a middle way that takes ten minutes a month and tells you something useful. This guide is about running the business, not about tax: what you can claim and how to treat it is a question for gov.uk or your accountant.
Three reasons that have nothing to do with HMRC:
Too few and the numbers tell you nothing. Too many and you will stop. A set that suits most small businesses:
| Category | What goes in it |
|---|---|
| Premises | rent, rates, utilities, cleaning |
| Software and subscriptions | anything that renews by itself |
| Equipment and tools | things you keep |
| Materials and stock | things that go into the work |
| Vehicle and travel | fuel, parking, trains, mileage |
| Marketing | advertising, website, print |
| Professional fees | accountant, insurance, memberships |
| Office and sundries | stationery, postage, coffee |
| Staff costs | training, workwear, expenses repaid to staff |
Name them in the words you use. If you cannot decide where something goes within five seconds, the categories are wrong, not you.
Look at the last three months, take the average, and round it. It does not need to be right; it needs to exist. A budget is what turns a list of spending into a question: why was marketing £400 over? Without one, every number looks normal.
Some costs are lumpy: insurance once a year, a tool that lasts three. Either spread them (annual cost ÷ 12) or accept that the month they land will be red and note why.
The habit that makes everything else work is handling a receipt at the moment you get it:
If you are VAT registered, record the net amount and the VAT separately, because the VAT you can reclaim is not a cost to the business. If you are not registered, the full amount is the cost. Either way, keep the receipt: a bank statement line is not a VAT receipt.
Mileage in your own vehicle is the expense people forget, because no receipt arrives. Keep a simple log: date, from, to, miles, reason. The approved mileage rates are on gov.uk, and a calculator turns the log into a figure in seconds.
On the first working day of the month:
That is it. The point is not precision; it is noticing.
Use a separate bank account for the business, even as a sole trader. It is the single biggest time-saver there is: every line on the statement is a business line. When you do pay for something personally, record it that day as "to be repaid" and repay yourself at month end in one transfer.
A one-page calculator is right for checking a month. When you want to see the year, month by month, with budgets that differ between departments or projects, VAT to reclaim, and receipts ticked off, you want a tracker that remembers your categories and rolls the months up for you. Start simple, and move when the simple version is what is slowing you down.
Check this month's spending against your budget in the free Office Expenses Calculator: spend by category, net of VAT, with the VAT you can reclaim.
Take a look
Sheetsmith