Incidental expenses can be one of the trickiest categories for businesses to manage. These are the smaller, often unpredictable costs that don’t fall neatly into your regular budget, like last-minute supply runs, urgent repairs, client lunches, or unexpected travel-related fees.
While individually minor, they can add up quickly and lead to larger issues if left unchecked. The challenge is finding the right balance: you want your team to have the flexibility to cover these costs when they arise.
But at the same time, too much incidental spending, or a lack of visibility into it, can lead to budget overruns, compliance issues, and a lack of centralized control over company finances.
In this article, we demystify incidental expenses, explain why it’s critical to track them effectively, and offer practical strategies to keep them in check without slowing down your operations.
Key Takeaways
- Takeaway #1: Incidental expenses are small, unbudgeted costs that arise during business travel or other activities. They are connected to the primary purpose of the business activity but are not part of the main cost.
- Takeaway #2: Incidental expenses often include things like taxi fares, baggage handling, tips, parking, tolls, gifts, perks, and meals (for clients or employees).
- Takeaway #3: Tracking and controlling incidental expenses is very important for accurate budgeting, financial control, fraud and theft prevention, expense reporting, and paying taxes.
- Takeaway #4: The best way to control incidental expenses is to build a process within your business, centralize spending with a corporate card, and automate your expense tracking.
What Are Incidental Expenses?
Incidental expenses are unforeseen, unplanned, often small expenses that arise during business activities like travel, dining, entertainment, or personal care. For example, when an employee travels for work, incidental expenses might include tips for taxi drivers or hotel staff.
While these expenses often occur outside of regular budgeted costs, they can certainly impact your bottom line if you don’t keep a close eye and tight control over them.
Types Of Incidental Expenses
There are many types of incidental expenses, but most fall into three broad categories: travel and transportation, entertainment, and employee encouragement.
Travel And Transportation
Travel and transportation incidental expenses include things like:
- Taxi fares
- Baggage handling
- Tips and gratuities
- Phone bills
- Vehicle rental
- Parking
- Tolls
- Wi-Fi or internet access
Basically, any small, unexpected purchase of goods or services needed for the trip.
Entertainment
Entertainment incidental expenses include things like:
- Gifts
- Perks
- Meals for customers/clients
While many businesses don’t necessarily plan for such entertainment incidentals, some set aside money into a petty cash account — either at a bank or somewhere at the business — to cover these small costs when they occur.
Supplies And Materials
For construction or trades businesses, incidental expenses are often tied to the unpredictable nature of job sites and field work. Common categories include:
Materials & Supplies
- Unexpected small hardware purchases (e.g., fasteners, adhesives, replacement parts)
- Quick runs to local supply stores when inventory runs out
Tools & Equipment
- Low-cost tool replacements
- Battery packs, chargers, or tool accessories
Job Site Necessities
- Personal protective equipment (PPE) like gloves, masks, or safety glasses
- Clean-up items (trash bags, brooms, cleaning solutions)
These expenses aren’t usually budgeted line-by-line but are necessary to keep jobs running smoothly and on schedule.
Why Controlling Incidental Expenses Is Important
Accurate Budgeting
Ignoring incidental expenses can significantly disrupt the budget you create for your business.
Tracking these small expenses can help you paint a more accurate picture of business costs and gain a better understanding of business spending patterns.
Financial Control And Decision-Making
Small incidental expenses can quickly add up and turn into a significant drain on your finances.
Gaining a clear picture of all spending — including incidental expenses — can help you exert more control of where your money goes and make more informed financial decisions for your business.
Fraud And Theft Prevention
Sometimes, incidental expenses can easily “fly under the radar” because they’re so small. For example, $10 for a tip may not seem like something you have to keep track of.
Unfortunately, this opens the door to fraud and theft.
Monitoring and controlling small expenses like tips, parking, and tolls can help your business avoid the issues that come with accidental and intentional fraud or theft.
Tax Implications
Many incidental expenses are tax deductible, so keeping track of these purchases can be beneficial for your bottom line.
Know the rules and regulations regarding those expenses. Talk to an accountant or other tax professional for more details on what incidental expenses you can claim and what incidental expenses you can’t claim.
Tips To Control Incidental Expenses
Build A Process
One of the best things you can do to control incidental expenses is to build a process that helps employees understand what’s acceptable and what’s not.
This often includes clear and concise policies regarding receipt collection and adding context to a transaction so that it’s fully transparent to those on the accounting end of the business.
Depending on the type of program you set up, other parts of the process may include how to get a purchase approved, what’s considered a business-related expense and what’s not, how to get reimbursed, and how to use a per diem.
Establish A Budget
While your business may not necessarily plan for specific incidental expenses, that doesn’t mean you can’t budget for them.
Determine how much your business wants to spend on things like tips, meals, and coffee for the team once a month, and then set aside money to cover those costs.
Reduce The Need For Incidentals
Creating a budget that includes incidental expenses — at least the broad strokes of those expenses — can help you reduce the time and effort it takes to process those unforeseen purchases.
Take the time to plan ahead and think about all the business-related purchases an employee may need to make while away from the office.
An easy way to keep track of everything your employees spend is with a centralized purchasing method like a smart fuel card, business credit card, or corporate card.
Automate Your Expense Tracking
With the right credit card and software, you can automate all of your expense tracking, management, and control into one easy-to-use solution.
Coast, for example, includes tools that help you automate receipt and job code capture; monitor expenses in real time; integrate with management software, telematics, and accounting software; and receive notification of inappropriate or fraudulent transactions.
Educate your team
Once you’ve got your system in place, educate your team so they’re better equipped to determine the difference between acceptable purchases and unacceptable purchases.
Be sure to communicate clear and predictable rules. This will help prevent employees from getting stuck in indecision when they’re on their own in the field.
Control Your Incidental Expenses With Coast
Incidental expenses may be small, but they can create big challenges if left unmanaged, especially for businesses with teams on the move. That’s where Coast makes a difference.
Coast’s smart fleet and expense management platform is designed to give you the flexibility to cover incidental costs, while maintaining control and visibility across every transaction.
With Coast, you can:
Empower Your Team Without Losing Control
Give employees or drivers the ability to pay for what they need—whether it’s a toll, tool, meal, or top-off of DEF fluid—without handing out cash or using personal cards. Each Coast card comes with customizable controls, so you decide who can spend, how much, where, and when.
Track Every Transaction in Real Time
No more chasing down receipts or guessing where money went. Coast gives your finance or operations team instant visibility into all spending, including incidental purchases, so you can monitor usage and identify trends before they become problems.
Automate Policy Enforcement
Set spending limits, merchant category restrictions, or daily budgets to keep incidental costs in check. Coast enforces your policies automatically at the point of purchase, eliminating the need for manual audits.
Simplify Reconciliation and Reporting
Each Coast transaction is clearly categorized, and Coast integrates with your accounting tools, making it easy to reconcile even the smallest purchases without adding work to your back office.
To learn more about how Coast can help your company, visit CoastPay.com today.
Frequently Asked Questions
Are incidental expenses tax-deductible?
It depends. Some incidental expenses are tax-deductible because they are an ordinary and necessary part of business spending. Other incidental expenses aren’t tax-deductible because they are not an ordinary and necessary part of business spending.
For more information on what is and isn’t an incidental expense for your business, consult with a tax professional.
What if an employee loses proof of purchase for an incidental expense?
Losing receipts will happen. Or, sometimes, an employee just can’t get a receipt (e.g., a cash tip to a taxi driver).
If the incidental expense is small, you may choose to accept detailed notes from your employee explaining the expense. These written explanations may or may not be enough proof for the IRS, so consult with an accountant or tax professional to be sure.
That’s why it’s essential to stress to your employees the importance of asking for and retaining receipts for all business purchases — regardless of the dollar amount.
Is a per diem an incidental expense?
A per diem is a daily allowance provided by a business that employees can use for expenses like travel, lodging, and meals. Because of that, a per diem is typically categorized as an incidental expense.
Most businesses require their employees to retain records of what they use the per diem for so they’re not using the business’s money for non-business-related goods and services.
Keeping receipts, invoices, and other proofs of purchase makes record-keeping much easier and streamlines reporting when tax time rolls around.
