How to create an expense report in 4 steps

Every field on an expense report is there for a reason. When you understand the "why," you'll get reports right the first time.

Here are the four critical components every expense report should cover:

1. Business purpose documentation

Business purpose documentation is where most expense reports fail. Auditors look here first because IRS Publication 463 requires specific justification. For example, business meals require names of attendees, business relationships, and topics discussed. "Client dinner" won't survive an audit. "Dinner with Sarah Chen, VP of Procurement at Acme Corp, to discuss Q3 contract renewal" will.

2. Receipt attachments

Receipts do more than prove you spent money. They provide IRS audit defense since expenses get disallowed without them. They help prevent fraud by verifying that claimed expenses actually happened. And they support your company's internal control documentation.

3. Category classification

How you categorize an expense directly affects its tax treatment. Meals are generally deductible at 50%, while entertainment deductibility has been significantly restricted. Miscategorizing an entertainment expense as a meal creates real tax exposure if you get audited.

4. Dates matter twice

The expense date determines which accounting period it belongs to, a fundamental Generally Accepted Accounting Principles (GAAP) requirement. The submission date affects accrual accounting and month-end close. Most companies require submission within 30 to 60 days because late submissions distort financial reporting.

Creating an expense report correctly the first time gets you reimbursed faster and eliminates the rejection-and-resubmission cycle that delays payment by weeks. Follow these four steps to submit complete, audit-ready reports.

Step 1: Document expenses immediately

Capture receipts the moment you make a purchase. Even waiting a day creates problems. Receipts fade or get lost, and your memory of why you spent the money fades even faster. Without that context, you're stuck guessing when it's time to submit.

A compliant receipt needs to show the date, a description of what you bought, the amount paid, vendor information, and payment method. Digital receipts work just as well as paper, so email confirmations from airlines, rideshare apps, and hotels all count.

Most expense management apps can extract this data automatically through OCR, so a quick photo becomes a complete expense entry.

Step 2: Organize your information before creating the report

Getting organized before you create the expense report form helps you avoid the rejection cycle. Missing information is the top reason finance teams reject reports. Each rejection means fixing issues and restarting the approval process from the beginning.

Start by sorting your receipts chronologically by expense type. Pull project codes and cost center information from your financial management software before you begin. Charging a $2,000 expense to the wrong code can trigger budget variance investigations, so it is worth getting this right.

Document meal attendees, their companies, and what you discussed while the details are still fresh. For conferences, download the agenda and note which sessions you attended. Double check that payment methods match receipt amounts exactly. Even a $2 discrepancy can hold things up while finance investigates.

Step 3: Create the expense report

Access your company's expense management system and complete all required fields.

Required information includes employee name, department, and ID. Add the date of each expense, vendor name and location, and amount with currency and applicable taxes. Select the appropriate expense category and payment method (like personal funds or a corporate card). Document the business purpose with specific details and attendee names for meals or entertainment. Include the project code or cost center and attach all receipts.

Categorize expenses according to your chart of accounts. Standard categories include:

• Travel (airfare, hotel, ground transportation)
• Meals and entertainment
• Office supplies
• Software subscriptions
• Professional development

When uncertain, ask your finance team. Proper categorization is essential for tax compliance and vital for financial reporting.

Review everything before submission. Verify amounts match receipts exactly. Confirm business purposes are specific. Check that expense dates fall within your company's submission window.

Step 4: Submit the report and wait for approval

Submit your report through your company's designated expense management software. Most organizations use a multi-level approval process where your direct manager confirms the business purpose first, followed by a finance review for policy compliance and proper categorization. High-value expenses may also require senior leadership sign-off.

Approval typically takes 2 to 5 business days per level, with reimbursement processed within 5 to 10 business days after final approval. If a report is rejected, simply correct the flagged issues and resubmit; do not create a duplicate entry.

Finance teams encounter recurring expense reporting errors. Preventing these eliminates audit exposure and unnecessary rework. Here are the most common issues to watch for.

Vague business purpose documentation

"Team lunch" tells auditors nothing. IRS requirements demand specificity: names and business relationships of attendees, specific topics discussed, and the business purpose served.

Duplicate submissions

Duplicates happen when employees submit the same expense through multiple channels or resubmit rejected expenses without proper tracking. Use expense management software with duplicate detection that flags identical receipt amounts, dates, and merchants before payment processing.

Late submissions

Only 2.6% of expense claims get approved immediately according to 2025 data. Nearly 27% take more than 30 days. Late employee submissions cascade into delayed approvals, which cascade into close cycle delays.

Missing or illegible receipts

Paper receipts fade, get crumpled, or disappear, causing expenses to get disallowed in audits. Mobile receipt capture solves this by letting employees photograph receipts immediately, creating clear documentation that's automatically backed up and attached to transactions.

Miscategorizing expenses

Categorizing entertainment as meals creates real tax exposure since entertainment has significantly restricted deductibility post-TCJA while meals remain 50% deductible. AI-powered categorization reduces this error by learning from corrections and suggesting appropriate categories based on merchant data.

Inappropriate spending patterns

Some employees split purchases to stay under approval thresholds (buying $400 USD of supplies as two $200 USD transactions) or mix personal expenses with business charges on corporate cards. A clear expense policy combined with pattern detection and real-time monitoring catches these before they become audit findings.

Finance teams that automate and standardize expense processes spend less time chasing receipts and more time on strategic work. The practices below reduce manual effort, improve compliance, and compress approval cycles.

1. Automate receipt capture and matching

AI-powered receipt capture using OCR automates data extraction from receipts in multiple formats. Real-time receipt matching pairs corporate card charges with documentation as transactions occur, eliminating the month-end scramble for missing receipts.

87% of CFOs now prioritize expense automation to improve accuracy and compliance. Digital receipt capture eliminates manual data entry errors and transforms what used to take 20 minutes per expense report into seconds of automated processing.

2. Conduct risk-based auditing

Not every expense needs the same level of scrutiny. A three-level approach works well here. Run automated checks on 100% of submissions, sampling-based reviews on 10 to 20%, and full audits only when risk indicators like unusual patterns or high-value transactions appear.

3. Require electronic payment methods

Credit and debit cards provide automatic electronic records, detailed transaction statements, and simplified reconciliation. Corporate card programs with direct feed integration automate receipt matching. Transaction data flows directly into the expense management software with merchant information and amounts automatically populated.

4. Integrate with accounting systems

Accounting system integration eliminates manual data transfer and reduces month-end close time by sending data directly to your general ledger. The efficiency gains are significant. Organizations using manual processes spend four times more per transaction than those with full automation.

5. Create clear, accessible expense policies

Employees can't follow rules they don't understand. Make policies easy to find and read. Include specific dollar limits, approved expense categories, required documentation, and approval workflows. Update policies annually and communicate changes clearly.

6. Set up automated reminders

Send notifications before submission deadlines to reduce late submissions. Automated reminders at seven days, three days, and one day before deadline significantly improve on-time submission rates and reduce the month-end scramble.

7. Use mobile-first expense capture

With 79% of organizations experiencing payments fraud attacks in 2025, real-time capture through mobile apps helps prevent fraudulent submissions. Employees can photograph receipts, add business context, and submit expenses while the transaction is fresh in their minds.

8. Implement spend controls at the card level

Pre-set spending limits by category, merchant type, or time period. Brex enables finance teams to set granular spending limits directly on corporate cards, blocking out-of-policy transactions before they occur rather than flagging them after the fact. This shifts expense control from reactive to proactive.

Your approach to expense reporting should match your company's complexity and scale.

Small companies (under 50 employees)

Focus on simple, consistent processes. Even a spreadsheet works if everyone follows it. The key is establishing good habits early, like immediate receipt capture, clear business purpose documentation, and regular submission deadlines. Don't over-engineer. Just be consistent.

Mid-size companies (50–500 employees)

At this stage, you need dedicated expense software with approval workflows and ERP integration. Manual processes break down at this scale and create bottlenecks and errors. Look for platforms that automate receipt matching, enforce policies at submission, and sync directly with your accounting system.

Enterprise (500+ employees)

Larger organizations require sophisticated automation, multi-level approvals, and global policy management. Multi-entity structures, multiple currencies, and complex approval hierarchies demand platforms built for scale. AI-powered categorization and anomaly detection become essential when you're processing thousands of transactions every month.

A well-run expense reporting process protects your company during audits, gets employees reimbursed faster, and gives finance teams cleaner data to work with. The fundamentals are straightforward. Document the business purpose clearly, capture receipts immediately, categorize expenses correctly, and submit on time. When everyone follows these steps, reports get approved on the first try and finance spends less time chasing down missing information.

For finance teams, the real gains come from automation and smart controls. Risk-based auditing, electronic payment requirements, and software integrations all reduce manual work while improving compliance. The companies that get this right recover thousands of hours annually and close their books faster.

Brex brings all of this together in one platform. Our expense management software automates receipt capture and matching, enforces policies at the point of transaction, and integrates directly with your accounting system. Pair it with corporate cards that let you set granular spend controls by category or merchant, business banking for simplified cash management, and accounting automation to eliminate manual data entry. You get a complete financial stack that scales with your company and keeps your team focused on strategic work instead of chasing receipts.

See the difference for yourself with a free trial of Brex. You can set up your account in minutes and start automating your expense reporting process today.

What should be included in an expense report?

Think of your expense report as answering three questions: who spent the money, what was it for, and how can we verify it? The goal is giving your approver enough context to say "yes" without asking follow-up questions.

Can I create an expense report in Excel?

Technically yes. But Excel works until it doesn't. A 10-person startup can manage monthly expense reports in spreadsheets because one person handles reconciliation, categories stay simple, and everyone knows the process.

Problems emerge around 50 employees when finance spends full days matching receipts to spreadsheet entries, different employees use different category names for identical expenses, version control breaks (which file is final: "Q4_expenses_v3" or "Q4_expenses_FINAL_actual"?), and nobody catches duplicate submissions until the audit.

If you're spending more than four hours monthly on expense reconciliation, you've outgrown spreadsheets. Business expense tracking software automates the manual work that breaks down at scale.

How long should employees have to submit expense reports?

Most companies set 30- to 60-day submission windows, but tighter deadlines improve accuracy. Employees often forget business context after two weeks. Consider a tiered approach:

• Corporate card charges: 15 days (as transaction data is already captured)
• Out-of-pocket expenses: 30 days (because employees are floating personal funds)
• International travel: 45 days (to account for currency conversion and complex documentation)

What expense report mistakes trigger audits?

Auditors look for patterns, not individual errors. Here are the red flags that trigger closer scrutiny:

• Round number clustering
• Weekend charges without justification
• Merchant category mismatches
• Threshold manipulation
• Suspiciously consistent expenses

One miscategorized meal won't trigger an audit. But ten consecutive months of suspiciously consistent "client entertainment" expenses will.

Do I need to keep receipts after submitting an expense report?

Yes, but retention requirements vary by expense type and jurisdiction. Your expense report documents what you claim; receipts prove what actually happened.

Consider an IRS audit three years later: without meal receipts showing attendees, your $12,000 annual client entertainment deduction gets disallowed. Or an employee dispute six months out when a former employee claims unpaid reimbursement, but your records show the approved report and payment date.

Digital retention through expense management software beats paper files. That way, receipts don't fade, nothing gets lost in office moves, and you can search by vendor or amount instantly.