In today's dynamic work environment, particularly with the rise of remote and hybrid teams, asynchronous video communication has become an invaluable tool. Loom is a popular platform that lets users quickly record and share video messages of their screen and camera, facilitating clearer communication, more effective training, and personalized outreach. For accountants and Small Business Owners (SMBs) integrating Loom into their workflows, appropriately categorizing the associated expenses is vital for accurate financial management, cost tracking, and adherence to tax regulations. This guide provides clarity on classifying Loom expenses, important elements to consider, the relevant tax implications based on IRS guidance, and how Fyle can streamline the process of managing these costs.
Loom expenses are the costs your business incurs for utilizing the Loom video messaging platform. Loom allows users to create and share video recordings that can include screen capture, camera feed, and audio narration, making it useful for a variety of business applications such as:
The expenses are typically for subscription plans (e.g., Starter, Business, Enterprise) that offer varying features, recording capabilities, storage, and user limits.
Loom operates primarily as a Software-as-a-Service (SaaS) solution, and the expenses for its use are generally treated as operational costs. Here’s how these can be classified:
The most common and accurate classification for Loom subscription fees is "Software Subscriptions". Given its function in facilitating video messaging, it could also be categorized under "Communication Software Expenses," "Collaboration Tools," or as part of a broader "Technology Expenses" or "IT Department Costs."
Should your business opt for an annual Loom subscription, IRS regulations regarding prepaid expenses become relevant.
As a general principle, an expense paid in advance that creates a benefit extending significantly beyond the current tax year should be capitalized.
However, the "12-month rule" exception allows for a current deduction if the benefit from the prepayment does not extend beyond the earlier of 12 months from when the benefit is first realized, or the conclusion of the tax year following the year the payment was made.
Business expenditures related to Loom commonly include:
Subscription fees for Loom, when employed for legitimate business activities such as enhancing team communication, creating training materials, or facilitating sales and customer support, are generally tax-deductible as ordinary and necessary business operating costs.
To substantiate deductions for Loom expenses, businesses must maintain adequate and accurate records. These should confirm:
Retaining all invoices, subscription agreements, and payment confirmations from Loom is crucial for tax purposes.
Managing and accurately accounting for recurring cloud-based service fees like those for Loom can be notably simplified through an expense management platform like Fyle:
Loom typically delivers billing information and payment receipts electronically. Fyle allows for these vital documents to be easily forwarded from your business email (such as Gmail or Outlook) into its system. Fyle's platform can then automatically extract relevant data, create an expense recordin, and digitally attach the original receipt, ensuring organized recordkeeping.
With Fyle, you can implement specific rules for automatic categorization of Loom expenses. This promotes uniformity in your financial data.
If Loom subscriptions are paid via a company credit card linked to Fyle, the transaction details are captured in real-time through direct integrations with major card networks like Visa, Mastercard, and American Express. Fyle can subsequently auto-match these transactions with the corresponding Loom invoices, making the reconciliation process swift and reducing manual checks.
Fyle boosts robust, two-way integrations with leading accounting systems, including QuickBooks Online, QuickBooks Desktop, NetSuite, Xero, and Sage Intacct. This means that once Loom expenses are processed and verified within Fyle, they are seamlessly and accurately transferred to your company’s main accounting ledger, minimizing manual data entry and maintaining current financial information.
Fyle’s analytics and dashboard features provide immediate, clear insights into all operational spending, including costs for communication and collaboration tools like Loom. This allows finance teams to monitor these expenses effectively, track them against budgets, and understand the company's investment in its technology stack.
By employing Fyle to manage Loom expenses, businesses can achieve greater control and efficiency in their financial operations, ensuring all costs associated with this valuable communication tool are accurately documented, correctly classified, and smoothly integrated into their accounting workflows.