Expense management

Common business expenses and its tax deductibility in Singapore

Apr 05, 2024

To run any business, it’s inevitable that you’ll have to make business expenses. In fact, they’re a part of your daily operations and for the most part, are required to ensure that your business runs smoothly.

Due to this, most organizations will need to make plenty of expenses to cover different aspects of their business.

Considering that business expenses are inevitable, you want to make sure that you’re well-equipped to manage them. Keeping a close eye on them ensures they don’t get out of hand.

What are business expenses?

As the name suggests, business expenses are the costs you incur from doing business. These expenses include most, if not all, of your daily operational costs, along with a number of others. 

For an expense to qualify as a business expense, it needs to be considered ordinary and necessary for the business.

This means that not only do they need to be required for business operations, but they also have to be commonly done by businesses in the same field.

What are the different types of business expenses?

1. Operating expenses

It’s difficult to run your company without making any operating business expenses. This includes expenses related to your day-to-day business operations that are not directly related to production.

Some examples are administrative fees, office supplies, and direct labor costs such as salaries and wages.

2. Cost of Goods Sold (COGS)

Whereas operating expenses are made to ensure that your business can keep running, the cost of goods sold (COGS) refers to the costs of producing your product.

Materials needed to produce your goods, as well as any product transportation costs, are considered COGS.

3. Capital expenses

Opposite to operating expenses, your capital expenses are costs that are not directly related to daily operations. Instead, they are incurred when you’re trying to set up the stage for production and operation.

Buying assets such as company vehicles, for example, is a capital expenditure.

4. Variable expenses

As the name suggests, variable expenses are varied whenever you make them. The amount of expense you’ll have to make can depend on several factors.

For example, commission-based sales compensation is a variable expense that depends on how many sales an individual made.

5. Fixed expenses

The opposite of variable expenses, fixed expenses are your recurring expenses that stay the same from month to month.

This would include rent costs and base employee salaries, minus variables like allowances or bonuses. Anything that you pay the same amount each month applies.

6. Recurring expenses

While they don’t necessarily have to be a fixed amount each time, recurring expenses happen over and over again over a period of time. This could be daily, weekly, monthly, quarterly, or yearly expenses. They may fluctuate in amount each time or stay the same.

7. Interest expenses

Interest expenses are considered non-operating expenses. They are incurred when you have debt or borrowed funds that you have to pay back with interest.

If you utilize credit cards and don’t clear your repayment in one billing cycle, for example, you’ll be subject to interest charges.

8. Incidental expenses

When a business makes incidental expenses, that refers to expenses that the business hadn’t planned for. They’re typically one-off expenses and are usually additional costs on top of other expenses that you’ve accounted for. Examples include baggage handling fees and hotel staff tips during business trips.

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Common business expenses list

Considering how many expenses an organization has to make to run smoothly, the common business expenses list is unsurprisingly long. Some expense categories that most if not all businesses will likely utilize include rent, utilities, machinery, and maintenance.

If you have an office or production space that you use to do your daily business operations, you’ll have to make sure that you’re on top of these expenses to ensure that you can conduct business or create products in that space.

Businesses that have employees will also need to pay them compensation for their work, which is another business expense on the list.

There are other kinds of common business expenses that you’ll have to think of as well, like travel expenses, advertising fees, and technology costs. Depending on what your business is, the expense made under each category may differ.

Regardless, it’s likely that you’ll need to make expenses in these categories. Keep in mind that each expense needs to be made with a purpose in mind.

Last, you’ll also have to consider common business expenses such as legal fees and taxes. Every business will have to pay some form of taxes, and you’ll need to factor all the different kinds of taxes into your expenses.

It’s also best if you get a legal consultant, which will also likely incur a fee.

Check out article on the 7 effective ways to reduce business expenses to discover the 7 powerful strategies to slash business expenses and boost profits! Learn cost-cutting tips from experts to streamline your operations.

Which business expenses are tax deductible in Singapore?

The tax deductibility in Singapore is dependent on the guidelines set by the Inland Revenue Authority of Singapore (IRAS). Therefore, business expenses must comply with these guidelines to be considered tax deductible.

Here are some common examples of expenses your business may make that are tax deductible in Singapore.

1. Rent and lease expenses

Considering that it’s often difficult for businesses to operate without an office space, rent and lease expenses are deemed necessary and ordinary. This means that they are tax deductible in Singapore.

Utility costs are also considered deductible business expenses.

2. Employee salaries and benefits

Costs related to employee pay are fully deductible. These expenses could come in the form of wages, salaries, or other employee benefits. You want to be sure that you are aware of what particular benefits are considered tax deductible.

3. Office supplies and consumables

Whatever supplies and consumables that are deemed necessary to run your business are deductible. This includes office stationery such as pens, stamps, papers, and many more.

Depending on the type of business, there can also be other supplies. For restaurants, it can be plates, pans, dish soap, and more.

4. Advertising and marketing expenses

Advertising and marketing expenses that are tax deductible in Singapore include both online and offline expenses.

This can be digital marketing ads, flyer printing, billboard costs, video production, offline marketing events, and many more. It just needs to be a common marketing expense in your business field.

5. Business travel expenses

This includes business expenses that are made for necessary business travel. Included in this category are general transportation or vehicle-related expenses, such as cab fares, plane tickets, parking, or gas.

You can also deduct miles driven with the IRS standard mileage deduction.

6. Employee training and professional development expenses

These are workshops, seminars, classes, or any other education-related expenses that are made with the purpose of providing training and professional development to your employees.

Expenses within this sphere are considered ordinary and necessary, meaning they are tax deductible.

7. Insurance premiums

If you have insurance premiums, they may be tax deductible. This is true if your premiums have your employees as beneficiaries as they are considered employee benefits, which are deductible.

Premiums of keyman insurance and work injury insurance also count.

8. Repairs and maintenance expenses

It’ll be difficult to do business with broken equipment or office spaces. In this case, repairs are considered necessary for your business. This is why your repair and maintenance expenses fall into the tax-deductible category.

9. Bad debts

Bad debts, or money owed that are no longer recoverable, are tax deductible. However, it should be noted that bad debts that count towards tax deductibility must be trade debts. This can be money owed by a delinquent customer.

10. Donations

While donations aren’t ordinary and necessary, —as business expenses should be—you can still deduct them from your tax liabilities. However, not every donation is deductible.

They need to be made to an approved Institution of a Public Character (IPC) or to the Singapore Government for local communities.

11. Depreciation

You may find that your assets will depreciate in value over time. This could be true about buildings your business owns along with machinery and equipment.

Depreciation can also happen on patents and copyrights. You may claim capital allowances to offset depreciation.

It’s important to note that not all expenses are fully tax deductible. Some may only be partially tax-deductible or have specific conditions that must be met to be considered deductible.

When filing tax returns, it’s recommended that businesses seek professional advice from IRAS or tax consultants. This ensures that you are in compliance with tax regulations and helps you maximize your tax deductions.

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Which business expenses are non-tax deductible in Singapore?

Considering that tax-deductible business expenses must meet certain criteria, not all your expenses will be deductible. If they are only indirectly related to your business or considered not entirely necessary, they may be written off as non-tax deductible expenses.

1. Personal expenses

It should go without saying that personal expenses are non-tax deductible. Often, they’re not even considered business expenses as they are not necessary for the company.

However, it’s worth noting that the line between business and personal expenses can be blurry, so it’s best to consult a professional.

2. Entertainment expenses

At some point you may find yourself making entertainment expenses, whether that’s to entertain your customers or to increase employee satisfaction.

They may be indirectly necessary to maintaining your business relations, but because they’re not directly tied to operations, they’re considered non-deductible.

3. Capital expenses

Capital expenses are made to launch your business during the early days of establishing it. Initial capital won’t come from your sales, but rather from other sources.

As they are made before your business is in operation, capital expenses are typically not considered tax deductible.

4. Non-charitable donations

Donations that are made to non-charitable organizations are not considered deductible expenses. Some examples are contributions to political parties in the form of a campaign donation.

Only charity donations are deductible when it comes to your taxes.

5. Interest on capital

If you have business capital that you still need to pay back, you may be subject to interest.

Unfortunately, as capital expenses are not considered tax-deductible, interest on capital is also non-tax deductible as it is not directly tied to production.

6. Penalties and fines

Considering that penalties and fines generally can be avoided, they don’t meet the criteria of being necessary for business operations.

They don’t qualify as tax-deductible expenses because of that. As a general rule, you also want to avoid having to spend money on these.

7. Provision for bad debts

While bad trade debts can be considered deductible when filing your taxes, the same isn’t true for provisions for bad debts.

There may be specific instances where it can be deductible, but generally speaking, provision for bad debts cannot be calculated as tax deductible.

Impact of market trends on business expenses


Inflation and economic crisis

As the world recovers from the pandemic, it’s no surprise that inflation has hit hard. In many countries, the costs of raw materials, utilities, and even rent are rapidly rising.

It makes it even more important for businesses to manage their spending wisely to avoid doubling the expenses they are making.


Digital transformation

Many businesses are beginning to realize that manual processes are no longer effective, especially in the digital era. It’s no surprise that there is an increase in demand for automation.

In recent times and the near future, your business is likely to have to make automation expenses a priority.


Sustainability initiatives

There’s an increasing emphasis on sustainability initiatives such as waste reduction efforts and renewable energy, which in the long run will likely help businesses save costs, resources, and even space.

However, many of these initiatives require initial investments. This could create additional expenses before you reap the benefits.


Change in work models

New remote and hybrid work models that are emerging after the pandemic are influencing what expenses businesses make.

Instead of spending a large amount of money on office spaces, utilities, or business travel costs, these business expenses are often replaced with expenses for IT infrastructure and tools to help with a remote work model.

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How to keep your business expenses under control?

1. Create a budget

Considering the different business expenses examples, it’s clear that when you run a business, you’ll have a lot to think about. Without a budget, your expenses can get out of control really fast.

You want to have a budget for all kinds of expenses to give a clearer idea of how much you can spend.

2. Establish expense policies

It’s important that have expense policies in place to ensure that everyone in your organization is aware of what the guidelines are for business expenses. This will include what expenses are allowed and not allowed, how to report expenses, expense request workflows, who to go to for queries, and other necessary information.

3. Prioritize the expenses

Not all expenses are going to be of equal importance. You want to pinpoint which expenses are absolutely necessary and must be made immediately.

On the other hand, if you can delay or cut back on another expense, you’ll be able to manage your cash flow more effectively and control your expenses better.

4. Embrace automation technology

Often traditional processes like manual data entry or reconciliation can get too tedious to the point where you’re either wasting too much time on them or your expense management gets sidelined.

To ensure neither of these things happens, you want to utilize automation technology. It’ll make managing business expenses faster and more efficient.

Check out our article to take your expense management to the next level. Streamline processes, save time, and gain financial insights with our expert recommendations on expense management automation.

5. Evaluate subscriptions and contracts

Many companies rely on many different suppliers and subscriptions to run their businesses effectively.

However, due to the sheer amount of subscriptions and contracts you may have, they could end up costing you a lot of money. It’s good practice to regularly evaluate them to determine if there are any you could cut out or renegotiate.

6. Seek professional advice

You want people who know what they’re doing involved in your business expense management process. This could be people in your finance team who have years of experience under their belt or you could outsource a consultant.

Either way, you want to seek advice from professionals experienced in finance and expense management.

7. Monitor cash flow

To determine how much cash you have available for expenses, you’ll need to be monitoring your cash inflows.

Similarly, you also want to track your cash outflows to see how your money is being used so you don’t overspend. Make sure that you’re keeping a close eye on both your cash inflows and outflows.

8. Optimize energy consumption

In large office spaces, you may end up with high utility bills that could put a dent in your cash flow.

If you have many employees who travel or are on the road a lot, you may also end up spending a lot of money on gas. You want to streamline these processes and implement energy optimization strategies.

9. Implement cost controls

While having a business expenses list is great for tracking purposes, you also want to actively control your expenses. An expense management solution will be able to provide you with in-built spend controls and automated approval processes.

For example, you can set up a multi-level approval workflow for supplier payment requests.

10. Use expense management tools

Considering how difficult and time-consuming managing your expenses without automation can be, looking into expense management software can help streamline your processes.

With features such as automated transaction records, approval workflows, and accounting integrations, you’ll be able to manage your spending more effectively and keep your business expenses under control.

Check out our article on the best expense management solutions to explore the top picks, features, and benefits of some of the best options available. Make informed decisions and streamline your financial processes. 

Why should business expenses be tracked?

Makes audits easier and smooth

Audit seasons are known to be headache-inducing, but they don’t have to be, when expenses are being tracked.

If you have a detailed record of your business expenses list and know where to go to find the information you need at all times, you can easily filter through and view necessary information for audits, eliminating the need for searching.

Lesser expense frauds

Sometimes fraud attempts can go undetected, especially when you don’t have tight control over your expenses.

You can ensure that internal fraud attempts aren’t happening by making it known that every expense made is tracked. In the unfortunate event of a fraud attempt, you’ll also be able to spot it and nip it in the bud immediately.

Helps avoid unnecessary spends

By consistently tracking and monitoring your business expenses, you can pinpoint what expenses are actually unnecessary.

Big purchases, for example, are worth regularly analyzing to see if you need them and if you’re getting the return you expected on them. You’ll find deciding which expenses to cut off much easier.

Adherence to expense policies

It’s likely that you already have expense policies in place to encourage employees to make expenses appropriately. Tracking your business expenses helps you make sure that your employees are adhering to these company expense policies.

When you have solid policies, this means that employees will be spending sensibly and within company expectations.

Performance evaluation

Analyzing your financial performance will be easier when you consistently track your expenses. This is especially useful and important when you have different departments, projects, or initiatives.

By looking at how much money you’re spending on each project or initiative, for example, you can deduce whether it gave the return you projected.

Help identify tax deductibles

Considering that not all business expenses examples listed above are fully deductible, you want a way to quickly identify what your tax deductibles are.

Tracking your expenses with an expense management solution and categorizing them will provide you with a quick way to determine expenses in which categories are tax deductible.

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How to track business expenses effectively?

1. Set up a system

You’ll want to have a proper system to be able to track your business expenses. It’s important that everyone in your organization is on the same page on what system is to be used in order to track and manage your spending effectively.

One way to do this is by utilizing expense management software.

2. Collect and organize receipts

The best way to ensure that you have an accurate business expenses list is to collect all your receipts. However, doing this in the traditional way manually can get tedious and takes up a lot of space.

Instead, opt for a tool that can help you snap pictures and digitize your expense receipts in an organized manner.

3. Create expense categories

It can get difficult to track your business expenses if you’re presented with just one long list, especially if you have a lot of transactions.

To remedy this, it’s recommended that you create expense categories. This way, employees will be able to select a category for each expense. Filtering through your expenses will be much easier.

4. Record expenses promptly and accurately

Aside from receipt collection, most businesses will also require employees to formally record expense details following a template according to company policies.

Using an expense management solution with mobile accessibility will allow your employees to record and report expenses from anywhere. With the expenses still freshly made, you run into fewer risks of reporting errors.

5. Reconcile bank and card statements

Make sure that your bookkeeping doesn’t get neglected. You want to reconcile your bank and card statements with the supporting documentation of your transactions.

Doing this regularly will help you identify any suspicious transactions or fraud attempts. An automated expense management solution is the right tool to make the reconciliation much smoother.

6. Monitor and analyze expenses regularly

With automation tools, getting accurate records of your expenses doesn’t have to be difficult. You want to make the most of this by regularly monitoring and reviewing your expenses through your expense management software.

Analyze what categories you’re spending the most on and if there are any expenses that you can cut.

7. Calculate total expenses

You want to see how much you spend within a certain time period. It’s a good idea to calculate what your total expenses from different categories are within a month or a quarter.

It’ll give you a better idea of future expense forecasts as well as how much revenue you have to generate to cover those expenses.

8. Prepare financial statements

By using expense management software to track your expenses, you’ll be able to generate financial statements hassle-free. Make sure that you’re making the most of all your expense data and processing them into different statements.

This could help give you a better perspective on your financial health and aid you in forecasting.

Importance of managing business expenses

Financial health

When your expenses are not managed appropriately, you’ll have a hard time controlling what employees are spending. Expenses that are not necessary will end up being made without a second thought.

In the end, that’ll be detrimental to your business' financial health. Having an expense management solution will help you get a better picture of what your financial health looks like in real-time, thus enabling you to implement spend controls that correspond to it.


You could generate as much revenue as possible for your business, but unless you can manage your expenses effectively to balance your income, it’ll be hard to achieve profitability.

With the direct correlation between expense management and profitability, managing your business expenses is necessary to push down your costs and keep them at a manageable level to ensure that you’re not burning through your revenue.

Make sure that everyone in the company knows what expenses are necessary.

Cash flow management

To keep your business operations running smoothly from day to day, you’ll want sufficient cash inflow for the corresponding amount of outflow.

Having a business expenses list that you can refer to will give you a good idea of how many expenses you’ll have in the near future.

As a result, you’ll also be able to estimate how much money you need, making your cash flow forecast even more accurate.

Related read: How to increase cash flow in a business?

Cost control and efficiency

Any business will want to push down costs as much as they can without compromising on quality or daily operations. If you manage your business expenses well, you’ll have a better chance of reducing costs.

This is because you’ll be able to ensure that employees are only making approved expenses. You can also more easily view what your expenses are and use filters to search through them, enabling you to pinpoint any expenses that can be cut.

Increase stakeholder confidence and investor relations

Businesses that manage their expenses well inspire trust in stakeholders. Internal stakeholders, for example, will feel assured that the business can run smoothly. Externally, it also gives off the image that your business is credible.

This will enhance the business’ reputation and ultimately satisfy your existing investors. Managing your business expenses well can also garner interest and trust from potential investors, attracting them to invest in your business.

Risk mitigation

Uncontrolled expenses are risky. For one, you could end up running into undetected fraud attempts.

Making expenses without any clear guidelines could also lead to problems such as overstocking your inventory, which will ramp up your storage and utility costs.

The more expenses you make, the less cash you’ll have reserved for emergency situations, too. Enforcing your policies by using expense management software can mitigate these risks to help you breathe easier.

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What are the tools and technologies available for expense management?


Expense tracking and reporting software

One of the biggest improvements you can bring to your expense management process is by introducing expense tracking and reporting software. Using one will allow you to easily track different kinds of expenses, whether they are vendor payments, payroll, reimbursements, or card transactions.

You can introduce a streamlined approval workflow, letting employees file expense reports right on the platform and automatically notify approvers of them. It also allows you to access past expense reports easily.


Mobile expense management apps

Transportation expenses like gas and parking are some business expenses examples that are difficult to make from your office. Traditionally, this means that employees may have to wait until they’re back in the office space before filing expense reports.

This could result in employees forgetting the details or reporting the expense altogether. Mobile expense management app can help you avoid that. Employees will be able to report expenses from anywhere and approvers can review them instantly.


Virtual cards and digital payment solutions

Instead of relying on cash, it’s recommended to make the switch to virtual cards and other forms of digital payments. This enables better tracking and visibility of your business expenses. All card expenses will be automatically recorded on a card management platform.

You’ll also get access to various control features such as custom limits and card freezing to help you make sure that all expenses meet company policies.


Receipt scanning and OCR technology

To make collecting and storing receipt data easier, you should consider looking into optical character recognition (OCR) technology as an expense management solution. Using a tool that allows you to scan your receipts and automatically record information from it helps eliminate the need for manual data entry.

All your employees will have to do to is scan receipts of business expenses. Information read by OCR will be automatically recorded and stored on your system.

What is an expense management software?

It can get difficult to manage your business expenses manually, especially when you make so many different ones each month. Expense management system is a tool that you can utilize to automate some of your processes, simplifying and speeding them up.

You’ll get access to features like automated expense tracking, simplified expense reporting, and in-built spend controls. Paired with mobile accessibility, you can manage expenses easily from anywhere with an expense management solution.

Benefits of using expense management software

1. Streamlined expense tracking

There’s no need for mountains of paper files. Tracking your expenses is made easy by digitizing the whole process.

Automation tools can allow you to record transactions hassle-free, with additional information easily added from anywhere through the use of a mobile app. You can access your expense data at any time from your software.

2. Improved accuracy and compliance

The problem with manual data entry is that sometimes it leads to human-made errors, some of which can be fatal during tax and audit seasons.

Luckily, you won’t have to worry about that when you use expense management software. Automation tools will help you ensure that your records are accurate and comply with the regulations.

Navigate the complexities of expense management with our comprehensive article on ensuring expense report compliance. Uncover proven strategies and best practices to maintain accuracy, adhere to policies, and avoid costly pitfalls. Streamline your expense management practices, ensuring seamless compliance and mitigating risks effectively. 

3. Real-time expense visibility

An expense management solution can give you improved visibility over your expenses. With automatic expense records, you’ll get real-time updates on how your money is being spent.

You can even set up alerts and notifications so you know what expenses are being made, which is especially useful for larger transactions.

4. Enhanced policy enforcement

No matter how good your expense policy is, sometimes it can be hard to enforce them. With an automated expense management solution, however, monitoring your business expenses is a lot simpler.

You can set up your software to automatically flag and notify you of any suspicious or out-of-policy expenses.

Related read: How to design employee expense reimbursement policy?

5. Seamless expense reimbursement

There may be instances where your employees have to make out-of-pocket business expenses. If your business does a lot of reimbursements, you want this process to be as simple as possible.

There are many expense management software that will allow your employees to easily file claims and automatically notify approvers for review and settlement.

Interesting read: A detailed guide on expense reimbursement

6. Better data analytics

Your expense management dashboard will allow you to search through your expenses and filter your searches as you see fit. You’ll also get a visualization of what your expenses look like.

This way, you can make use of your time analyzing the data you already have on hand, leading to better decision-making.

Volopay — All-in-one expense management solution

With all the business expenses that you have to make, you’ll want an expense management solution that allows you to effortlessly track, manage, and control every dollar that leaves your company.

Use Volopay, the expense management software that’ll help you save time and money while staying on top of your expenses.

Get features like automated expense tracking, receipt scanning, accounting integrations, and many more to make managing your expenses easier. Anything from expense reports to reimbursements can be done seamlessly through one platform.

All it takes is a few clicks for employees to submit expense reports, which can immediately be reviewed by managers. Reimbursement claims will be settled in no time hassle-free!

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