What expense category is Apollo.io Expenses?

In the modern business landscape, tools that enhance sales intelligence and customer engagement are indispensable. Apollo.io is one such platform, widely used by businesses to find and connect with potential customers. For accountants and Small to Medium-sized Business (SMB) owners, understanding how to categorize expenses related to services like Apollo.io is crucial for maintaining accurate financial records and ensuring tax compliance.

This guide will explore the appropriate expense category for Apollo.io, key considerations when classifying these costs, typical examples of such expenses, their tax implications based on IRS guidelines, and how Fyle can assist in automating the tracking of these digital service expenditures.

Apollo.io Expenses Category

Apollo.io is a sales intelligence and engagement platform that businesses typically subscribe to for services like lead generation, contact database access, email automation, and analytics. As such, expenses related to using Apollo.io are generally considered operating expenses necessary for sales and marketing functions.

For accounting and tax purposes, these expenses usually fall into categories such as:

• Software Subscriptions or Software Licenses: This is often the most direct classification for SaaS (Software as a Service) platforms like Apollo.io, where businesses pay a recurring fee (monthly or annually) for access to the software's features.
• Dues and Subscriptions: This is a broader category where costs for various business-related subscriptions can be placed.
• Marketing or Sales Expenses: Given that Apollo.io's primary functions support sales and marketing activities, its costs can also be categorized here. IRS Publication 334 notes that advertising expenses directly related to your business are generally deductible.‍
• Other Business Expenses: This is a general category that can be used if the expense doesn't neatly fit elsewhere but is an ordinary and necessary cost of doing business.

The key is that the expense must be an "ordinary and necessary" cost incurred in carrying on your trade or business.

Some Important Considerations While Classifying Apollo.io Expenses

Subscription Model vs. Purchased Software

• Most SaaS platforms like Apollo.io operate on a subscription basis (monthly or annual fees). These are typically treated as operating expenses and are deducted as they are incurred or paid, depending on the accounting method.
• This differs from purchasing outright software with a perpetual license, which might be capitalized and amortized over its useful life (generally 36 months for off-the-shelf software not acquired as part of a business purchase, as per IRS Publication 946, Chapter 1 ). Since Apollo.io is typically a subscription, it's usually expensed.

Timing of Deduction for Subscriptions

If an annual subscription is paid in advance, cash-basis taxpayers can generally deduct it in the year paid if the benefit does not extend beyond the earlier of 12 months after the benefit is first received or the end of the next tax year. Accrual-basis taxpayers would typically allocate the expense over the subscription period.

Start-up Costs 

If a subscription to Apollo.io is initiated before the business officially begins its active trade or operations, the cost might be considered a business start-up cost. IRS Publication 535 explains that start-up costs may include expenses for advertising or wages for training employees before business operations begin. Businesses can elect to deduct up to $5,000 of start-up costs and amortize the rest, typically over 180 months. If the subscription begins after business operations are underway, it's treated as a regular operating expense.

Recordkeeping 

It is essential to maintain proper documentation. This includes:

• Subscription agreements or terms of service.
• Invoices from Apollo.io detailing the service period and cost.
• Proof of payment (credit card statements, canceled checks). These records substantiate the expense and its business purpose.

Allocation (Internal)

If Apollo.io is used by multiple departments (e.g., sales and marketing), a business might internally allocate the costs for more granular departmental budgeting, although for tax purposes, the total business-use cost is the primary concern.

Examples of Apollo.io Expenses

Expenses related to Apollo.io that a business might incur include:

• Recurring monthly or annual subscription fees for platform access.
• Fees for different tiers of service offering varied features or usage limits.
• Charges for add-on services, such as:
  
  • Purchasing additional credits for contact reveals or email verification.
  • Fees for data enrichment services.
  • Costs associated with using integrated tools like a sales dialer or email sequencing features, if billed separately or as part of a higher-tier plan.

Tax Implications of Apollo.io Expenses

Deductibility

Subscription fees paid for sales intelligence and engagement platforms like Apollo.io, when used for legitimate business purposes (such as generating leads, market research, or sales outreach), are generally deductible as ordinary and necessary business expenses under IRC Section 162.

Timing of Deduction

• Cash Method: Businesses using the cash method deduct the expense in the tax year it is paid. For advance payments (e.g., an annual subscription), the "12-month rule" often allows deduction in the year of payment if the benefit doesn't extend substantially beyond the earlier of 12 months or the end of the following tax year.
• Accrual Method: Businesses using the accrual method deduct the expense in the tax year when the all-events test is met and economic performance occurs. This typically means the expense is recognized over the subscription period as the service is made available or consumed.

Capitalization vs. Expensing

• Standard subscription fees for SaaS like Apollo.io are generally expensed.
• This is distinct from costs for developing custom software or purchasing perpetual software licenses, which often require capitalization and amortization. IRS Publication 946, Chapter 1 specifies that off-the-shelf computer software that is not a Section 197 intangible can typically be depreciated over 36 months. However, a recurring subscription fee for a cloud-based service like Apollo.io is more akin to a rental or utility expense.

Sales Tax

If applicable, sales tax charged on the Apollo.io subscription fees would be considered part of the total deductible expense, provided the subscription itself is for business use.

Recordkeeping for Tax Audits

Maintain all relevant documentation, including invoices, payment confirmations, and any agreements, to substantiate these expenses in case of an IRS audit.

How Fyle Can Automate Expense Tracking for Apollo.io Expenses

Managing digital subscriptions like Apollo.io, ensuring timely payments, and correctly categorizing them can become challenging as a business grows. Fyle's expense management solution provides several features to simplify this:

Real-Time Credit Card Feeds 

If Apollo.io subscriptions are paid using a business credit card connected to Fyle, transactions are captured automatically and in real-time, providing instant visibility into this spend.

Automated Receipt and Invoice Management

Digital invoices from Apollo.io can be automatically fetched from emails (Gmail/Outlook) or easily uploaded by users. Fyle can then attach these to the corresponding transactions, ensuring complete documentation.

Recurring Expense Tracking

Fyle can help manage and track recurring subscription payments, making it easier to budget for these costs and avoid missed payments or service interruptions.

Accurate Categorization & GL Sync

Fyle enables businesses to set up custom categories (like "Software Subscriptions" or "Sales Tools") and can automatically code Apollo.io expenses to the correct General Ledger accounts. This information, along with supporting documents, syncs seamlessly with accounting software like QuickBooks Online & Desktop, Xero, NetSuite, and Sage Intacct, ensuring financial records are always current and accurate.

Spend Visibility and Control

With Fyle’s dashboards and analytics, businesses can get a clear view of their spending on SaaS tools like Apollo.io. This helps in identifying usage patterns, managing budgets effectively, and spotting any redundant or underutilized subscriptions.

Approval Workflows

For new subscriptions or changes in service tiers that might require approval, Fyle’s customizable workflows ensure that these expenditures are reviewed according to company policy before payment or reconciliation.

By using Fyle to manage Apollo.io and similar SaaS expenses, accountants and SMB owners can save significant time, improve data accuracy, ensure compliance, and gain better control over their software and subscription spending.