Expense Categorization System

Business Type: Marketing & AI Consultancy (Singapore-based)

Reporting Needs: Tax compliance (IRAS), project-based profitability, and overhead monitoring.

1. Category Structure

The system is organized into four top-level “buckets” to separate core delivery costs from the cost of staying in business.

• 01: Cost of Goods Sold (COGS) / Project Delivery
• 02: Growth & Acquisition
• 03: Operations & Overhead
• 04: Capital Expenditure (CapEx)

2. Definitions

• COGS: Direct costs required to fulfill client work. If you don’t have a client, these costs should ideally disappear.
• Growth: Money spent to find, win, and retain customers.
• Operations: Fixed costs required to keep the business legal and functional regardless of sales volume.
• CapEx: High-value assets with a lifespan of more than one year, typically subject to depreciation.

3. Example Mapping

4. Usage Rules

• The “Client Link” Rule: Any expense that can be billed back to a specific client or is essential for a specific project must be tagged with a Project ID and categorized under COGS.
• Threshold for CapEx: Any single item purchase over $1,000 should be categorized as CapEx for tax depreciation purposes (following Singapore’s capital allowance rules).
• Receipt Accuracy: All Grab/Transport receipts must include a “Business Purpose” note (e.g., “Meeting at NTU”) to ensure deductibility.

5. Recommendations

• Digital Tools Audit: Review the “Tech & Tooling” sub-category monthly. AI tool costs can spiral quickly due to seat-based or token-based pricing.
• Separate Software Folders: Distinguish between “Client-facing Software” (COGS) and “Internal Administrative Software” (Operations) to see your true service margin.
• Automated Scanning: Use a tool like Hubdoc or Dext to automatically push digital receipts into these specific categories to reduce manual entry errors at year-end.

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