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Getting a grip on your expenses

No matter what the size of your business is, keeping tabs on your company’s expenses can be challenging, time-consuming and cumbersome. Time is a valuable but often scarce commodity, especially for sole traders and self-starters.

With the advent of financial technologies and open banking, it is now much easier to collect a digital record of your small business expenses. The Amaiz app automatically records and categorises your taxable expenses as you make purchases, but you don’t have to stop there – the financial health of your business is something you want to keep an eye on constantly.

First things first, you need to get a grasp on some general terms.

Business expenses definition

Any expenses that are incurred to produce the goods or services that your business provides can be classified as business expenses. An expense is only allowable for tax purposes if it's incurred wholly and exclusively for the purposes of conducting your business.
The expenses your business incurs will depend on the industry your business operates in, the stage that your business is at and other factors that relate to the operation of your business.

Below you’ll find some practical and common approaches to slicing your business expenses.

Fixed vs variable

Capital expenditure vs operational expenses

There are two types of expenses that a business will incur: capital expenses (Capex) and operational expenses (Opex). Capital expenses are expenses that are incurred to purchase tangible or intangible assets. Capital expenses provide future economic benefits to the business and are normally kept in the business for more than one accounting period. Any expense that is capitalised will need to be depreciated over its useful economic life (how long you expect to use the asset for). Examples of capital expenses include the cost to buy machinery, computers, software, e.t.c
Operational expenses, on the other hand, are all regular expenses that are unlikely to have future benefits and these are expenses that your company has to make to maintain its daily operations. Examples of operational expenses include rent, employee salaries, travel expenses.

Capital Expenses vs Operating Expenses

  • Pupose: Assets purchased with a useful life beyond current year
  • When Paid: Lump sum up front
  • When Accounted For: Over 3-10 year lifespan while asset depreciates
  • Listed As: Property or equipment
  • Tax Treatment: Deducted over time as asset depreciates
  • Pupose: Ongoing costs to run a business
  • When Paid: Monthly or annual recurring
  • When Accounted For: In the current month or year
  • Listed As: Operating Cost
  • Tax Treatment: Deducted in the current tax year

There are, however, some greyer areas, so when in doubt ping our accountancy experts via the in-app chat if you have an account with us or right from the website if you don't. They will point you in the right direction and help you figure out which rules are applicable in your particular case.

Expense categorisation

Making your business purchases with the Amaiz card helps to save your time, filling in your self-assessment in real time.

In an upcoming blog post, we’ll be covering another aspect of managing your company’s financial health - cashflow.

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By clicking “Send link” you agree with our Privacy and Cookie Policy and to your personal data being collected and processed by us