What set of expenditure categories would you recommend for your bookkeeping?

Boring subject, I know, but...

I am looking to set up my company's accounts shortly and would appreciate some guidance from more established business operators. I don't know if there is any standard practice in this field, and indeed if it varies from country to country (I'm UK-based), but I need to set up a list of expenditure categories for my bookkeeper. So far, with input from my accountant, I've come up with the following:

• Travel/subsistence
• Salaries
• Dividends
• Office supplies
• Rent & utilities
• Equipment/software


• Entertaining
• Miscellaneous

Thanks in advance - Steve.

Whatever you choose, here's my advice (as a business owner and a no-longer-practicing CPA): keep it simple. Select a short list of expense and revenue accounts to begin with, and resist the temptation to add more and more detail by having more and more sub-accounts. Even with decent small business booking software like QuickBooks, it's a lot of work if you have too many expense categories.

Concentrate on this: set up a budget (monthly budget for the next 12 months) and as part of that, set up a percentage of revenues that each one of, say, no more than 10 categories should be. Make sure that after subtracting those categories from revenue, you have something left (the technical term for this is "profit").

Once your business is actually operating and you're hitting those numbers for those five categories, if you want to add more complexity (more accounts) then go for it. Until then, keep it simple.

Remember Adler's fourth law: Happiness is positive cash flow. All else will come later.

• Tim

From a practical standpoint, the 'chart of accounts' is only as useful as the information it displays. For example: Category 'Office Supplies' reflects only the number that is entered there, but if you want to track how much you spend on 'Staples' or 'mechanical pencil lead replacements' you would simply have to create a sub-category or separate expense item. It depends entirely on how much detail you need to manage them, and how much time you can afford to devote to miniscule breakdowns.

As a general rule I usually try to keep it just as simple, clean and uncomplicated as possible. The more people you have to discuss these items with, generally the more detailed and 'isolated' you need the categories.

Hope this helps.

I followed what were the categories used for tax filings. In some cases I broke those down further if it made sense to track specifically.

For many years I managed rental property and I carried over what practices I used there.

For me the issue is two things:

• What do you need to track for taxes and other compliance
• What makes sense for you to track in your business for trends, analysis, etc.

(This answer is a bit light on practical recommendations - sorry. I found it was a bit of trial and error to find the best trade-off between too much and too little)

Here are some additional expense accounts that maybe useful to you. I am assuming you are going to be selling some type of SaaS, software or IT services. If you are, you will want to keep track of your direct cost for producing your product as your gross profit margin is a key number to keep track of.

• Auto expense
• Dues and subscriptions
• Filing fees
• Insurance
• Postage and delivery
• Professional fees
• Repairs and maintenance
• Taxes
• Training and seminars
• Cost of services (for your product)

As someone that runs their own bookkeeping service most if not all industry software will be able to throw out a general list of accounts for you. Play with these to add a bit more detail in the areas that you wish to have more control over. But always when in doubt seek professional help. This is, like law, not an area for a startup that should of great focus and time wasting. From everything I have read and learnt so far, outsource these types of things and concentrate on your main expertise.

Just my two cents.

Disclaimer - Not looking for new clients at this time. Looking to start my own business here as well.