What are incidental expenses?
What are incidental expenses?
Incidental expenses are those small, often unexpected costs that come up during regular business operations but aren't part of your core business spending. They're not planned purchases, but they're necessary to keep things running smoothly.
These expenses typically fall outside your regular budget categories and might seem too small to track individually. However, they're legitimate business expenses that can add up quickly if you're not careful.
Examples of incidental expenses
You might be surprised at how many incidental expenses your business racks up in a typical month. Here are some common examples we see:
Office supplies purchased on the fly when you run out unexpectedly
Small equipment repairs or maintenance that wasn't scheduled
Last-minute shipping costs to get a rush delivery to a client
Refreshments for an impromptu client meeting
Parking fees when visiting clients or vendors
Small tools or supplies needed for a specific project
Emergency computer accessories when something breaks
The impact of incidental expenses on a small business
The real challenge of incidental expenses isn't that they're small, but rather how easily they fly under your financial radar. We've seen plenty of business owners get blindsided by these costs for several reasons:
They're often paid for out-of-pocket and forgotten before they make it to the books
The small amounts might not seem worth tracking, leading to incomplete financial records
They frequently fall into gray areas between expense categories, making them hard to classify
Multiple employees might make these purchases, creating inconsistent recording methods
Receipt management becomes challenging when dealing with numerous small transactions
How to manage incidental expenses effectively
While you can't eliminate incidental expenses entirely, you can implement systems to keep them under control. Here are some strategies we recommend to our clients:
Create a petty cash system with clear guidelines for what qualifies as an incidental expense.
Use a dedicated credit card for small purchases to automatically track spending.
Implement a simple receipt capture system. Most accounting apps now have mobile scanning features.
Set up a monthly budget specifically for incidental expenses based on historical spending patterns.
Review these expenses quarterly to identify any patterns that might indicate a need for better planning.
Train your team on proper documentation procedures for small purchases.
Technology solutions for incidental expenses
If you’re overwhelmed keeping track of all those little expense records, there are some great tools that can lighten your workload. Modern accounting software like QuickBooks or Xero offers excellent expense tracking features, including receipt scanning and automatic categorization.
We're also seeing more of our clients use dedicated expense management apps that integrate with their accounting software. These tools can help automate the process of capturing and categorizing small expenses, saving you valuable time.
Need additional bookkeeping support?
Sometimes, despite your best efforts, managing these expenses becomes too time consuming. That's often when business owners come to us for help. A good accounting firm can set up systems that make tracking incidental expenses almost automatic, letting you focus on running your business instead of chasing receipts.
An accountant can develop a comprehensive expense management strategy that accounts for both major purchases and small, day-to-day costs. By bringing order to your expense tracking, you'll have better insight into your business's financial health and more accurate records for tax time.
Remember, while these expenses might seem minor, having a solid system for tracking them is crucial for maintaining accurate books and understanding your business costs. Looking for more guidance on managing your business finances? Learn more about the bookkeeping services we offer for small businesses.