Startup Expense Management 101
How important is Expense Management for a startup?
You should set up a system to track expenses from day 1, even before you incorporate or have a business bank account.
The Best Expense Management Software can help.
FIRST THINGS FIRST - SET UP A SYSTEM
Set up a system to help with expense reporting and tracking. It’s not a bad idea to do this really early - even before incorporating or setting up a standalone bank account! You want to make a very clear distinction between your personal account and your business account from day one in order to save a lot of time, money and complexity later. It’s also normal for a company to have some (typically small) expenses that the founders have put on their personal credit cards that get reimbursed once a company gets funded (make sure the investors know if you are going to do this). So good tracking will help you get going, raise funding and have solid financial metrics. And, as I discussed with the New York Times, you want to make sure you have everything tracked properly in case you are audited by the IRS.
Expense Management Tools Before You are Funded
Before you have a bank account/get funded there are a few ways to manage your expenses.
- Use a dedicated expense management software
- Get an expense management system that is bundled with a bank or cash account
- Use a spreadsheet
The spreadsheet isn’t the greatest option - it requires manual work to maintain and will need to be manually put into your accounting system. But we’ve seen hundreds of organized founders use spreadsheets when they first found their companies, so we know it’s possible.
Expense management software can be cheap and very effective. Expensify has $4.99 per month plans for individuals, and this is a good option to use before you’ve been funded and have a bank account.
Two of our favorite finance tools, Rho and Brex, have a bank or cash management solution built into their expense management tools, which makes them possibilities for a company that has yet to fund raise but where the founders will kick some cash into the business. Rho is a real bank, and is used to working with pre-funded startups, so that’s our current recommendation if you want a bank + expense tool bundle prefunding.
Expense Tools After You are Funded
After you’ve gotten financing, even if it’s just $250,000, you’ve got more options. And if you are going to hire quickly, you’ll have employees - who will need to get reimbursed for items they put onto their own cards for the company, or who will need corporate cards.
At this point, you NEED an expense management software. Look for an automated expenses management system that can: document the paper trail of expenses for IRS audit purposes, help keep founder and business expenses cleanly separate, and easily integrate with your accounting system. The best expense management tools have a mobile app for scanning receipts on the go, accept invoices and payment records via email and have a killer web app for managing your records.
Some of the key features to look for in a system:
- Rock solid approval workflow
- Easy connection of the company’s bank account
- Easy connection to the employees bank account (for reimbursement funds flow)
- Easy connection to the company’s accounting system for painless bookkeeping
- Good customer service
- Virtual credit cards - the best expense reporting / management apps have credit cards that are easy to provision (learn about some on our best startup credit cards page)
Comparing the Best Expense Management Software
| Cost of Basic Expense Management | Free | Free | Free | $5 per mo per user |
| Cost of Advanced Expense Management | Free | $49 per mo (unlimited users) | Coming Soon | $9 per mo per user |
| Corporate Card or Expense Management Software? | Card | Card | Card | Either |
| Requires Solution Specific Card | Yes | Yes | Yes | No |
| Approvals? | Yes | Yes | Basic | Yes |
| Receipt Scanning App | Yes | Yes | No | Yes |
| Customer Service | Great | Good | Great | OK |
| Online UX | Excellent | Excellent | Excellent | OK |
| Virtual Cards for Employees | Yes | Yes | Yes | Yes |
| Has a Bank or Cash Management System | No | Yes | Yes | No |
| Visit Site | Visit Site | Visit Site | Visit Site |
Expense Management for Startups - Best Practices
- Use a software
- Have an expense management policy - who can expense what and when
- Record all business expenses
- Reconcile bank statements and credit cards with your corporate books
- Store receipts so you can be ready for an IRS or accounting audit
- Reimburse employees if they use their own cards
- Generate monthly expense reports
- Organize expenses into categories so you can understand your spend
- Track every individual expense so you can spot irregularities
One way to automate Employee Reimbursements
One tip we have for companies that are going to have recurring reimbursements to specific employees is to use a payroll system that actually automates these recurring reimbursements. For example, Rippling has a great feature whereby you can send the same reimbursement to an employee every month. For example, if you pay $50 for an employee’s cell phone or home internet connection, why go through the hassle of having them submit an expense report every month for that? Read more about how to choose the best payroll system for your company.
The Sooner you Automate, the Better
Save future you (and your future accountant) a ton of time and headache. If you’re planning on growing fast after you raise capital, get a solid expense management solution set up. If you’re really early, go sign up for Rho. If you’ve already got some funding, you have more options like Brex and Ramp. But all are easy - do it now!
Want to know more?
IRS audits and expense tracking
Detailed comparison of Brex vs Ramp
If you are storing all of your receipts in a shoebox? Or stuffed in the glove box in your car? (Yes, this really does happen.) No problem, Kruze Consulting can help you get organized. Just set up a time to talk with us.
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Client testimonials
We're huge fans of Vanessa and the folks at Kruze Consulting. They set up our books, finances, and other operations, and are constantly organized and on top of things. As a startup, you have to focus on your product and customers, and Kruze takes care of everything else (which is a massive sigh of relief). I highly highly highly recommend working with Vanessa and her team.
Vivek Sodera
Co-Founder @ Superhuman
Prior to Kruze, as a remote-first team, we were weighed down by a lot of the bureaucracy involved with having a distributed workforce. Kruze has supported us above and beyond basic accounting needs by ensuring we have everything we need to expand and support our team wherever they may be located
Zack Fisch
Pequity's Head of Operations & Legal
Avochato has been growing rapidly in the past year – in fact, too quickly for us to keep up with books, taxes, and budgeting for growth. Partnering with Kruze Consulting has been fantastic to manage, track, and analyze our finances while we continue focusing on building our customer base. Kruze’s team knows what startups need.
Alex De Simone
CEO @ Avochato
Everybody, go to Kruze Consulting. They do a great job. I personally can tell you, they've done a great job for our companies, including Calm.com. I'm sure they’ll do a great job for you.
Jason Calacanis
Angel investor
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A CPA Firm Specialized in Startup Accounting & Finance
Startups are our niche, and our passion. Our clients have raised over $15 billion in VC funding. We are one of only a few outsourced accounting firms that specialize in funded early-stage companies - we only offer financial and tax services to fast growing startups in the Pre-Seed, Seed, Series A, Series B and Series C stages.
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We know how to de-risk your startup’s next venture capital round. Our team makes sure you are ready to fly through your next VC’s accounting, HR and tax due diligence. And when you use us as your bookkeeper, we set up and keep up-to-date a due diligence folder so you can get that next round of fundraising.
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Our practice is built on best of breed cloud accounting software like QuickBooks, Netsuite, Gusto, Rippling, Taxbit, Avalara, Brex, Ramp and Deel. Technology makes us more efficient, saving our clients money and letting us offer higher value services like FP&A modeling, 409A valuation, and treasury advice. Startups deserve to work with CPAs using modern software.
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Top angel investors and VCs refer Kruze because they trust us to give the right advice. Our clients are portfolio companies of top technology and Silicon Valley investors, including Y-Combinator, Kleiner, Sequoia, Khsola, Launch, Techstars and more. With us, your books and taxes are in order when it’s time to raise another round of venture financing.
What types of startups does Kruze Consulting usually work with?
Kruze Consulting works with funded Delaware C-Corps. Our clients have secured Pre-Seed to Series C or Series D funding. We look to partner with our clients, going beyond the typical outsourced accounting relationship and seeking to provide a higher level advisory role. We feel honored to be a part of making the world a better place, even if it’s one debit and credit at a time.
Accounting, Finance, Taxes, & Payroll all in one solution
Startup CFO services, startup accounting and bookkeeping services, startup annual taxes, expense reports, payroll, state sales taxes: we've got you covered. Our software provides custom tailored dashboards that can be provided weekly or monthly, depending on your preference and plan. Founders are often so busy building their company that they don’t have time to take care of their finances. Traditionally, these companies have had to work with a basket of people to get their work done, including bookkeepers, accountants, AP clerks, CFOs, consultants, and tax accountants. At Kruze Consulting, our founders have one point person, saving time and money.
