Managing Expenses and Reimbursements in Service Businesses

Why Expense Tracking Matters in Commercial Services

Commercial services businesses operate in a different world from retail or manufacturing. They are built around projects, contracts, and fieldwork. That means expenses are not just overhead. They are deeply tied to the profitability of each client and job. A missed receipt, a misclassified expense, or a late reimbursement does not only create bookkeeping headaches. It can completely distort job costing, hide margin problems, and lead to poor decisions about pricing or renewals.

In cleaning, maintenance, repair, IT services, or field contracting, accurate expense tracking ensures every cost is captured, employees are reimbursed promptly, and reports reflect the real cost to serve a client. Without it, management may underprice work, fail to bill reimbursable costs, or lose employee trust.

Common Types of Expenses in Commercial Services

Travel and Mileage

Field staff spend a large part of their day moving between sites. Mileage, fuel, tolls, and parking must be tracked consistently. The IRS publishes a standard mileage rate every year. For 2025, the business mileage rate is 70 cents per mile. Recording dates, locations, purpose, and total miles provides support for reimbursements and tax deductions.

Supplies, Tools, and Small Equipment

From cleaning chemicals to drill bits and safety gloves, small purchases occur constantly in commercial services. Many employees buy these in the field. If receipts are not submitted the same day, they are often lost. These costs should always be assigned to the correct client or project.

Subcontractors and Vendors

Specialty services or extra labor may be contracted. Their invoices need to be coded to the right job and phase of work. Delays in entry can cause inaccurate project reports and surprise losses at month end.

Meals, Training, and Certifications

Client-related meals, safety training, and required certifications are all business expenses. They need documentation and clear classification. The IRS provides detailed rules for when meals are deductible and what records must be kept.

The Documentation Standard That Protects You

Good documentation protects against audits and speeds monthly close. The IRS requires receipts, invoices, or other proof that shows amount, payee, date, and business purpose. This applies to purchases, travel, and operating expenses. Lodging always requires itemized receipts.

The $75 Rule

While receipts under $75 are not always required for certain expenses, many businesses still require them for consistency. Keeping everything documented reduces disputes and supports accurate reports.

Per Diem Rates

Some businesses use per diem allowances for meals and incidentals. The GSA publishes per diem tables, and many employers adopt these to simplify travel reimbursements. Dallas per diem rates are typically higher than the national standard, which is why using them can make reimbursement consistent and fair.

Reimbursements and Employee Trust

Employees often use personal funds for business needs. When reimbursements are delayed or inconsistent, it damages morale. It may even discourage staff from buying needed supplies in the field. Clear policies, simple submission, and predictable payment schedules build trust.

Accountable Plan Rules

Under IRS guidelines, reimbursements are tax free if three conditions are met. The expense must have a business purpose. Employees must provide substantiation of the amount, time, place, and purpose within a reasonable time. Any excess advance must be returned promptly. If these rules are not met, reimbursements become taxable wages.

Timing Expectations

The IRS suggests fixed dates, such as requiring substantiation within 60 days and returning excess within 120 days. Many businesses adopt these timeframes in policy to remain compliant.

Three Main Ways to Track Expenses

Manual Spreadsheets and Forms

The simplest system is paper forms or spreadsheets. Employees attach receipts and submit reports for approval. While inexpensive, this system is slow, error-prone, and unsustainable for teams with multiple employees.

Company Credit Cards

Issuing company cards shifts expenses directly to the business account. This reduces reimbursements but requires strong controls. Spending limits, receipt requirements, and category coding are essential. Without them, reconciliation becomes messy.

Mobile Expense Tracking Tools

Modern businesses increasingly rely on apps like Dext, Expensify, or QuickBooks Receipt Capture. Employees snap a photo of receipts, code the expense, and submit in real time. Approvals happen digitally, and data flows into accounting software automatically. These systems save time, reduce errors, and allow job-level expense tracking.

Personal Pitfall We Often See

Owners sometimes create a single “Expense Reimbursement” account in their chart of accounts. They post all reimbursements there rather than splitting them by category. It may look neat, but it hides the real cost structure of the business. When all reimbursements sit in one account, you cannot see how much was spent on travel, tools, meals, or training.

The correct method is to post each reimbursement to its original expense category. If an employee buys drill bits, code it to tools and supplies. If they pay for parking, code it to travel. If they cover a client meal, code it to meals and entertainment. This keeps profit and loss statements accurate and preserves job costing.

Linking Expenses to Job Costing

Expense tracking should not stop at categorization. To understand profitability, every cost must be linked to a client or project. This allows management to see margin by job, identify loss-making contracts, and adjust pricing before renewal.

If a cleaning contract consistently requires unplanned purchases of supplies, the cost may outweigh revenue. Linking expenses to jobs highlights this early. QuickBooks Online’s Projects feature, for example, ties time, expenses, and vendor bills to a client, making profitability reporting straightforward.

Best Practices for Reimbursements

Define What Is Reimbursable

List categories such as travel, tools, supplies, training, and client meals. Also list what is not reimbursable, such as personal items or fines.

Require Documentation

Align with IRS rules by requiring receipts for all lodging and for expenses over $75. Encourage digital receipts wherever possible.

Set Timing Rules

Require expenses to be submitted within 30 to 60 days. Process reimbursements on a predictable schedule, such as weekly or with payroll.

Enforce Job Coding

Make job selection required for every expense. This creates accurate project profitability reports.

Split Out of the Catchall

Do not use a single reimbursement account. Always allocate to the correct category and client.

Controls That Keep You Audit Ready

Strong controls ensure compliance and protect your business in an audit. Require substantiation of all expenses with date, vendor, amount, and purpose. Enforce consistent timing for submissions. Retain records for at least three years, though many accountants recommend longer. Use credit card controls such as spending limits and merchant restrictions. Track advances as receivables and convert them to wages if employees do not provide substantiation.

Choosing the Right Expense Method

Per Diem vs Actuals

Per diem rates simplify travel expenses by providing a fixed daily allowance. Actual expense methods require receipts and itemization. Many firms use per diem for internal travel and actuals for client billable trips.

Mileage Methods

Businesses can choose between the IRS standard mileage rate and actual vehicle expense method. The standard mileage rate is simpler and includes depreciation, fuel, and maintenance. Actual expenses require tracking every cost. For teams driving personal vehicles, the mileage rate is usually easiest.

Advanced Options

Some firms with heavy driving adopt a Fixed and Variable Rate (FAVR) allowance program. This adjusts reimbursements based on local costs such as fuel and insurance. While more complex, it can be more accurate than the mileage rate.

Technology Tools To Consider

Dext

A strong choice for scanning receipts and invoices, applying rules, and syncing directly into QuickBooks Online. It saves time and reduces errors.

Expensify

A comprehensive expense app with mobile features, mileage tracking, corporate card integration, and automated reimbursements.

QuickBooks Receipt Capture and Projects

QuickBooks offers built-in receipt capture and the ability to attach expenses directly to projects, giving owners job-level profitability reports without leaving the system.

A Practical Field Example

Consider a maintenance technician visiting three sites in one day. At the first site, they buy bolts and drill bits at a hardware store. At the second site, they pay for downtown garage parking. Between jobs, they drive 22 miles. Using Dext, they photograph receipts, select the job for each purchase, and enter mileage. The supervisor approves everything in minutes.

In QuickBooks Online, the purchases flow into tools and supplies for the correct job. Parking flows into travel. Mileage is reimbursed at the current IRS rate. Because the expenses are categorized correctly rather than lumped into reimbursement, the project report shows the true cost of each job. When the client requests backup documentation, receipts are ready to attach to the invoice.

Metrics Every Owner Should Monitor

Measure approval turnaround time to see if the process is fast enough for the field. Track the percentage of expenses with receipts attached. Monitor average days from spend to posting, since fresh data improves decision making. Review mileage per visit and cost per visit for route efficiency. Run job margin reports to spot contracts that consistently fall short of targets.

The Role of Bookkeeping

A bookkeeper turns policy into practice. They ensure expenses are posted consistently, reconciled on schedule, and allocated correctly. They help enforce the rule that reimbursements should never sit in one catchall account. Instead, they allocate costs back to original categories and jobs, preserving the integrity of financial statements.

Working with a bookkeeping professional also ensures compliance with IRS requirements, maximizes tax deductions, and keeps records audit-ready. For commercial service businesses in Dallas and beyond, this partnership creates financial clarity and helps management focus on growth instead of paperwork.

Conclusion

Expense tracking and reimbursements are not side tasks. They are central to profitability and employee trust. For commercial service businesses, a weak system leads to missed costs, late payments, and distorted reports. A strong system ensures every receipt is captured, every cost is categorized, and every employee is reimbursed on time.

Manual systems may work in the early days, but mobile expense apps integrated with accounting software provide speed, accuracy, and real-time reporting. Pairing these tools with strong bookkeeping ensures compliance, maximizes deductions, and makes profitability reporting useful. By following best practices, splitting expenses into correct categories, and linking everything to jobs, commercial service businesses can protect their margins and grow with confidence.