What expense category is Asana Expenses?

Efficient project management and team collaboration are cornerstones of successful modern businesses. Asana is a widely adopted work management platform that helps teams organize, track, and manage their projects and tasks. For accountants and Small Business Owners (SMBs), understanding how to correctly categorize Asana expenses is crucial for accurate financial reporting, effective cost management, and ensuring tax compliance. This guide will explain how to classify Asana expenses, discuss their tax implications, and demonstrate how Fyle can simplify the tracking of these operational costs.

What are Asana Expenses?

Asana expenses are the costs your business incurs for using the Asana work management platform. Asana offers various subscription tiers (e.g., Basic, Premium, Business, Enterprise) that provide a range of features for task management, project planning, workflow automation, and team collaboration. Payments made for these subscription plans, additional user seats, or premium features are considered Asana expenses. These are generally incurred to enhance productivity, improve project visibility, and streamline team workflows.

How to Classify Asana Expenses for Accounting and Tax Purposes

Asana primarily operates as a Software-as-a-Service (SaaS) solution, meaning businesses typically pay a recurring fee for access to the platform. Here are key considerations for classifying these expenses:

Operating Expense – Software Subscription or Project Management Tool:

• Asana subscription payments are most accurately classified as software subscription expenses.
• Businesses might also categorize them under a dedicated Project Management Software account or as part of broader categories like Office Expenses or General and Administrative Expenses in their chart of accounts.
• These costs are incurred for the ongoing operational needs of the business and are generally treated as operating expenses.
• To be tax-deductible, business expenses must be "ordinary and necessary." An ordinary expense is common and accepted in your field, while a necessary expense is helpful and appropriate for your business. Using Asana for project management and team organization typically meets these criteria if it serves a clear business purpose.

The 12-Month Rule for Prepaid Subscriptions (e.g., Annual Plans):

• Many businesses choose annual Asana subscriptions for cost savings. When prepaying for such subscriptions, IRS guidelines on prepaid expenses are applicable.
• Generally, you cannot deduct expenses paid in advance that create an asset with a useful life extending substantially beyond the end of the current tax year.
• However, the "12-month rule" provides an exception: you don't have to capitalize amounts paid for creating an intangible asset (like a prepaid subscription right) if the benefit does not extend beyond the earlier of:

1. 12 months after the date you first receive the right or benefit, OR
2. The end of the tax year following the year in which you made the advance payment.

• For a cash-method taxpayer, an annual Asana subscription can generally be deducted in the year it's paid, provided it meets this 12-month rule.
• For an accrual-method taxpayer, expenses are generally deducted when the all-events test is met (liability is fixed and determinable) and economic performance occurs. For a subscription service like Asana, economic performance occurs as the service is provided over the subscription term. Thus, accrual-basis taxpayers would typically recognize the expense ratably over the subscription period.

Distinction from Purchased Software:

• It's crucial to differentiate Asana subscription fees from the cost of purchasing software outright. If a business were to purchase project management software that it owns and installs, and which has a useful life of more than one year, it would generally be treated as an intangible asset.
• Off-the-shelf computer software (readily available, non-exclusive license, not substantially modified) that is purchased and not part of a business acquisition is typically depreciated using the straight-line method over 36 months, unless eligible for Section 179 expensing or special depreciation allowance.
• However, standard Asana usage involves paying for the right to access and use their cloud-based platform for a specific period (monthly or annually), not acquiring ownership. Therefore, these are typically treated as operating expenses.

Examples of Asana Expenses

Common expenses related to using Asana for your business include:

• Monthly or Annual Subscription Fees: Payments for specific Asana plans (Premium, Business, Enterprise).
• Per-User/Seat Fees: Costs that scale with the number of users in your organization accessing the platform.
• Fees for Premium Features: Charges for advanced functionalities like workflow automation, portfolio management, advanced reporting, or specialized integrations, if not included in the base plan.
• Charges for specific add-ons or usage-based features.

Tax Implications of Asana Expenses

Deductibility:

Expenses for Asana subscriptions used for legitimate business purposes, such as managing projects, coordinating team tasks, and improving operational workflows, are generally tax-deductible as ordinary and necessary business expenses.

Timing of Deduction:

• Cash Method: Businesses using the cash method of accounting typically deduct expenses in the tax year they are paid. An annual Asana subscription can usually be deducted in the year of payment if it meets the 12-month rule.
• Accrual Method: Businesses using the accrual method generally deduct expenses when they are incurred (all-events test met and economic performance occurs). For an annual subscription, this typically means allocating the expense over the subscription period.

Recordkeeping:

• To substantiate these deductions, meticulous recordkeeping is essential. Your records should demonstrate the payee (Asana), the amount paid, proof of payment, the date the expense was incurred or paid, and a description of the service received confirming its business purpose.
• Key documents to retain include:

• Invoices from Asana.
• Credit card statements or bank statements showing the transaction.
• Proof of electronic funds transfer or canceled checks.

These documents are crucial for supporting the entries in your accounting books and the deductions claimed on your tax return.

Automating Asana Expense Tracking with Fyle

Manually managing recurring software subscriptions like Asana can be inefficient. Fyle's expense management platform provides automation to simplify this for accountants and SMBs:

Effortless E-receipt Management: 

Asana usually delivers invoices and payment receipts via email. Fyle enables users to forward these e-receipts directly from their Gmail or Outlook inboxes. Fyle’s system can then automatically create an expense, attach the receipt, and intelligently extract necessary data.

Automated Categorization and GL Integration: 

Fyle can be configured with specific rules to automatically categorize Asana expenses under the appropriate account (e.g., Software Subscriptions or Project Management Tools) and assign the correct General Ledger (GL) codes. This ensures consistency and accuracy in your bookkeeping, as Fyle can import your chart of accounts, projects, departments, and other custom fields from your integrated accounting software.

Real-time Credit Card Reconciliation: 

If Asana fees are paid using a corporate credit card connected to Fyle, transaction data is captured in real-time from Visa, Mastercard, or AmEx networks. This allows for immediate notification and facilitates rapid matching of transactions with their corresponding receipts, drastically reducing reconciliation times.

Seamless Accounting Sync: 

Fyle offers customizable, two-way integrations with leading accounting systems such as QuickBooks Online, QuickBooks Desktop, NetSuite, Xero, and Sage Intacct. This ensures that once Asana expenses are verified in Fyle, they are automatically exported to your accounting software in real-time as credit card charges, bills, or journal entries, eliminating manual data entry.

Project Spend Tracking and Visibility: 

Since Asana is a project management tool, businesses often need to track costs associated with specific projects. While Asana manages the project tasks, Fyle can track the actual spend related to those projects, including the cost of Asana itself if allocated to a project, providing a comprehensive view of project financials. Fyle's spend overview dashboard offers insights into software expenditures, aiding in budget monitoring and cost control.

By leveraging Fyle, businesses can ensure that their Asana expenses are accurately captured, correctly categorized, quickly reconciled, and seamlessly integrated into their financial records, contributing to more efficient operations and better financial oversight.