4.6/51670+ reviewsHubSpot has become a cornerstone for many businesses, offering a comprehensive suite of tools for customer relationship management (CRM), marketing, sales, and customer service. As businesses increasingly rely on such platforms to attract, engage, and delight customers, it's essential for accountants and SMB owners to correctly categorize HubSpot expenses. Proper classification is key for accurate financial reporting, effective budget management, and ensuring tax compliance.
This article will provide a clear guide on categorizing HubSpot expenses, important considerations during classification, common examples of these expenses, their tax implications, and how Fyle's expense management solution can help automate and simplify the tracking process.
HubSpot operates on a Software as a Service (SaaS) model, with businesses typically paying recurring subscription fees for access to its various "Hubs" (Marketing Hub, Sales Hub, Service Hub, CMS Hub, Operations Hub) and features. For accounting purposes, HubSpot expenses generally fall into one of the following categories:
This is usually the most accurate and widely used category. It clearly reflects the nature of the payment for using a software platform. Many businesses have a dedicated "Software Subscriptions" account in their chart of accounts for tools like HubSpot.
If your business primarily uses HubSpot for its marketing automation features (email marketing, social media management, content creation, SEO, ads), categorizing the cost under "Marketing Expenses" is appropriate. This aligns with how businesses track costs associated with attracting leads and building brand awareness. The Ramp example pages list "Marketing" as a common expense category.
If the main use of HubSpot is for CRM, sales pipeline management, sales automation, and tools for the sales team, then "Sales Expenses" or a more specific "Sales Software" category would be suitable.
This is a broader category that can encompass various recurring business service payments. If your business prefers a simpler chart of accounts, HubSpot could fit here.
Some companies group all their technology-related costs, including software subscriptions, under this umbrella.
If HubSpot usage is diverse and doesn't fit neatly into a specific departmental expense, or if the amounts are minor, it could be categorized under a general operating expense. IRS Publication 334, Chapter 8, mentions "Other Expenses You Can Deduct" for such operational costs.
The most appropriate category will depend on how your business primarily utilizes HubSpot and the structure of your chart of accounts. Consistency in classification is crucial for accurate financial analysis and reporting.
HubSpot costs are typically recurring subscription fees (monthly or annually) based on the specific Hubs, tier of service, and number of users or contacts. These are operational costs, not capital asset purchases.
The expense must be "ordinary and necessary" for conducting your trade or business. HubSpot's functionalities for managing customer relations, marketing, sales, and service generally meet this criterion for most businesses.
If you pay for a HubSpot subscription annually, it is a prepaid expense. IRS Publication 535, Chapter 1, discusses that expenses creating a benefit that extends substantially beyond the current tax year might need to be capitalized.
However, the "12-month rule" often allows for a current deduction if the benefit does not extend more than 12 months beyond the first date the benefit is realized or beyond the end of the tax year following the year of payment.
For cash-basis taxpayers, an annual HubSpot subscription would generally be deductible in the year paid under this rule. Accrual-basis taxpayers would typically amortize the expense over the subscription term.
HubSpot plans can include various services (CRM, marketing tools, sales tools, etc.). While generally categorized as a single "software subscription," for internal purposes, a company might want to understand the cost associated with different Hubs if they are itemized or if usage is heavily skewed towards one function.
If you incur one-time fees for HubSpot implementation, setup, or specialized consulting, these might be treated differently from recurring subscription costs. Significant one-time setup fees that provide long-term benefits could potentially be capitalized and amortized, though often these are also expensed as professional services if they don't meet the criteria for asset creation.
Maintain all HubSpot invoices, contracts, and proofs of payment. This documentation is crucial for substantiating the expense for both financial accounting and tax purposes, a point emphasized in the IRS document "What kind of records should I keep?"
Your business might encounter various expenses associated with HubSpot:
As an "ordinary and necessary" expense incurred in the operation of a trade or business (as per IRS Publication 535, Chapter 1), HubSpot subscription fees are generally tax-deductible. This deduction reduces your business's taxable income.
As discussed, annual subscriptions paid upfront by cash-basis taxpayers are often deductible in the year of payment under the 12-month rule (IRS Publication 535). Accrual-basis taxpayers generally prorate the deduction over the service period.
While IRS Publication 946 discusses amortization for purchased or developed software (often over 36 months), standard SaaS subscriptions like HubSpot are generally treated as operating expenses (rent or lease of software) rather than the purchase of a software asset that needs to be amortized, unless there are significant, separable upfront costs for long-term software rights that would be treated as an intangible asset. The recurring subscription nature points towards a current expense.
The IRS requires taxpayers to maintain thorough records for all deductions. For HubSpot:
Manually tracking and coding software subscriptions like HubSpot can be time-consuming and error-prone. Fyle's expense management platform offers several features to automate and simplify this:
If HubSpot subscriptions are paid via company credit cards (Visa, Mastercard, Amex), Fyle’s real-time feeds capture these transactions instantly. This means no more waiting for statements to record the expense.
Fyle can automatically fetch and attach HubSpot e-receipts or invoices directly from your Gmail or Outlook inbox to the corresponding transaction in Fyle, ensuring complete documentation without manual effort.
Set up rules in Fyle to automatically categorize HubSpot expenses to the correct general ledger account (e.g., "Software Subscriptions," "Marketing Expenses," "Sales Tools") and assign them to the relevant department or project if needed.
Fyle offers robust, two-way integrations with leading accounting software including QuickBooks Online, QuickBooks Desktop, Xero, NetSuite, and Sage Intacct. This ensures that all HubSpot expense data, complete with receipts and correct coding, flows automatically into your accounting system.
Fyle can help identify and manage recurring expenses, making it easier to track ongoing subscription costs for tools like HubSpot and avoid duplicate or unnecessary charges.
Fyle’s dashboards provide a clear overview of all software and operational spending, helping businesses manage their budget for tools like HubSpot more effectively.
By leveraging Fyle, businesses can ensure that all HubSpot expenses are efficiently captured, documented, correctly categorized, and seamlessly synced with their accounting system, saving valuable time for accountants and providing SMB owners with clear financial insight
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