Why categories matter
An expense category answers the question “what was this for?” in a way your books can use. Consistent categories let you see where money goes, compare month to month, and hand your accountant clean numbers. Inconsistent ones, such as the same coffee shop coded as “Meals” by one person and “Office” by another, make every report unreliable.
The simplest rule is that your expense categories should be your chart of accounts, or a short list that maps onto it one to one.
A working list
Adapt these names to your own chart of accounts. The examples are a starting point, not a complete list.
| Category | Typical examples |
|---|---|
| Software and subscriptions | SaaS tools, cloud hosting, domain names, app subscriptions |
| Office supplies and small equipment | Stationery, peripherals, small furniture, printer ink |
| Rent and utilities | Office or coworking rent, internet, phone, electricity |
| Travel | Flights, hotels, rail, rideshare, parking, tolls, rental cars |
| Meals | Client meals, team meals, meals while travelling |
| Marketing and advertising | Ad spend, sponsorships, printing, design and events |
| Professional services | Accounting, legal, consulting, recruiting fees |
| Contractors | Freelancers and agencies paid outside payroll |
| Insurance | Business insurance premiums |
| Bank and payment fees | Card processing, wire fees, account charges |
| Education and training | Courses, conferences, books, certifications |
| Dues and memberships | Industry bodies, professional associations |
| Shipping and postage | Couriers, postage, packaging |
| Repairs and maintenance | Equipment and premises repairs |
| Miscellaneous | Anything that genuinely doesn’t fit yet |
Categories that need extra care
- Meals. Keep meals in their own category, separate from travel and entertainment, and record who attended and why. Meals are commonly treated differently from other expenses for tax, so ask your accountant what they need.
- Equipment. A low-cost item and a major purchase are often handled differently in the books. Agree a threshold with your accountant for when a purchase is recorded as an asset instead of an expense.
- Mixed-use purchases. A phone plan, a home internet connection or a trip with a personal extension covers business and personal use. Record only the business portion, and note how you worked it out.
- Subscriptions. Recurring charges are easy to forget. Review them quarterly and cancel anything unused.
- Software versus contractors. A tool a contractor uses and the contractor’s fee are different categories. Code them separately.
Keeping categories consistent
- Write a one-line definition for each category, with two or three examples, and share it.
- Use the same list on every card and for reimbursements. Two lists for the same business create reconciliation work.
- Code by what was bought, not who sold it. A retailer that sells both supplies and equipment shouldn’t always land in one category.
- Review the miscellaneous category monthly. If a merchant or type of spend appears there more than twice, give it a home.
- Let your bookkeeper own the chart of accounts. Changes should go through one person, so the list doesn’t drift.
Coding without the manual work
Card statements show cryptic merchant names, so coding by hand means first working out who each charge is from. Barespend turns messy merchant strings into real vendor names and codes each expense to your chart of accounts, so your bookkeeper isn’t recoding everything at month-end. It syncs with QuickBooks Online, Xero and Sage Intacct.
The IRS keeps a guide to deducting business expenses that points to its publications on each expense type. Pair this list with the expense policy template so people know which categories apply to what they buy.
Not sure where a purchase belongs? Try the expense classifier, or start from the free expense tracker template.