An expense is a cost incurred in the process of earning revenue. Expenses reduce your profit and are recorded on the profit and loss statement in the period they are incurred.
Expenses are the costs of doing business. They are recorded on the profit and loss statement and reduce your net profit (and therefore your taxable income). Expenses are categorised into several types: cost of goods sold (direct costs of producing your products or services), operating expenses (overhead costs like rent, utilities, salaries, insurance and marketing), interest expenses (cost of borrowed money) and tax expenses. Good expense management requires accurate categorisation - putting each expense into the right account in your chart of accounts. This enables meaningful reporting, proper tax treatment and informed decision-making. Common expense categories include rent, utilities, wages, insurance, professional fees, marketing, travel, office supplies, software subscriptions and depreciation. SortBooks automates expense categorisation by learning your spending patterns and applying the correct account code to every transaction in Xero - achieving 97%+ accuracy.
SortBooks automates the bookkeeping processes related to expense by connecting to your Xero account and using AI to categorise transactions, reconcile bank feeds and generate accurate reports. Instead of manually managing expense, SortBooks handles it automatically with 97%+ accuracy - saving you hours every week and ensuring your books are always up to date and compliant.
Revenue (also called sales, income or turnover) is the total amount earned from selling goods or services before any expenses are deducted. It is the top line of the P&L.
The P&L (also called the income statement) shows your business revenue, expenses and resulting profit or loss over a specific period.
Operating expenses are the day-to-day costs of running your business, excluding COGS. They include rent, wages, utilities, marketing, insurance and administrative costs.
COGS represents the direct costs of producing or purchasing the goods your business sells. It includes raw materials, direct labour and manufacturing overhead but not selling or administrative expenses.
SortBooks handles all the complexity automatically. Just connect Xero and let AI manage your books.