4.6/51670+ reviewsModern businesses rely on powerful tools to manage projects, foster team collaboration, and streamline workflows. Monday.com is a popular Work Operating System (Work OS) that offers these capabilities, helping teams plan, track, and execute their work efficiently. For accountants and Small to Medium-sized Business (SMB) owners, accurately categorizing expenses related to Monday.com is crucial for maintaining clear financial records, managing budgets effectively, and ensuring compliance with tax regulations.
This article will discuss how Monday.com expenses are typically categorized, important considerations for classification, common examples of these expenses, their tax implications, and how Fyle can automate the tracking of such software subscription costs.
Monday.com is a Software as a Service (SaaS) platform, meaning businesses typically pay a recurring subscription fee to access its features. When it comes to bookkeeping, Monday.com expenses generally fall into one of these categories:
This is the most common and often the most fitting category. It clearly identifies the expense as a payment for using a software platform. Many businesses group all their SaaS tools, including project management and collaboration software like Monday.com, under this heading.
A broader category that can encompass various recurring payments for business services and tools. If your chart of accounts is less granular, Monday.com could be classified here.
Some businesses prefer more specific categories. If you use Monday.com extensively for project management or as a primary collaboration hub, you might create a dedicated sub-category like this.
For some businesses, especially smaller ones where Monday.com is used for general operational organization, it might be grouped under "Office Expenses".
A general category for all technology-related costs, which could include software subscriptions.
If Monday.com is used exclusively or predominantly by a specific department, its cost might sometimes be allocated and categorized under that department's expenses (e.g., "Marketing Software").
The ideal category depends on your business's specific operational structure and chart of accounts. The key is to choose a logical category and apply it consistently for accurate financial tracking and reporting.
When classifying your Monday.com expenses, accountants and SMB owners should keep the following points in mind:
Monday.com is a subscription-based service. Payments are typically made monthly or annually for the right to use the platform's features and access support. This is an operating cost rather than a capital asset purchase.
To be deductible, the expense must be "ordinary and necessary" for your trade or business. Monday.com helps with project planning, task management, team communication, and workflow automation – activities generally considered ordinary and necessary for many businesses.
If you pay for an annual Monday.com subscription upfront, this creates a prepaid expense. According to IRS Publication 535, while expenses that create an asset with a useful life substantially beyond the current tax year usually need to be capitalized, there's an exception (the "12-month rule").
This rule generally allows for the current deduction of a prepaid expense if the rights or benefits do not extend beyond the earlier of 12 months after the benefit is first received or the end of the tax year following the year of payment.
For cash-basis taxpayers, an annual Monday.com subscription often meets this criterion, allowing for deduction in the year paid. Accrual-basis taxpayers typically recognize the expense over the subscription term it covers.
It is vital to categorize Monday.com expenses consistently across accounting periods for accurate financial analysis and comparison.
Maintain all invoices from Monday.com and proof of payments (e.g., credit card statements). This documentation is crucial for substantiating the expense. The IRS document "What kind of records should I keep?" details the importance of keeping supporting documents for all business expenses.
Expenses related to your Monday.com subscription can include:
Properly accounting for Monday.com expenses is important for tax purposes:
As an ordinary and necessary business expense, subscription fees for Monday.com are generally tax-deductible, reducing your business's taxable income. This applies if the software is used in carrying on your trade or business with the intent to make a profit.
For sole proprietors filing Schedule C (Form 1040), Monday.com expenses are typically reported under "Office expenses" (Part II, line 18) or "Other expenses" (Part II, line 27a), with a description like "Software Subscriptions" or "Project Management Software". See IRS Publication 334, Chapter 8 for guidance on Schedule C expenses.
For corporations and partnerships, these expenses are reported on their respective tax returns (e.g., Form 1120, Form 1065) under appropriate business expense categories.
As discussed, annual subscriptions paid upfront may be fully deductible in the year of payment for cash-basis taxpayers if they meet the 12-month rule outlined in IRS Publication 535. Accrual basis taxpayers generally prorate the deduction over the subscription period.
The IRS requires taxpayers to keep records that support entries on their tax returns. For Monday.com expenses, ensure you have:
Unlike custom-developed software, which might have different amortization rules (such as those under Section 174 for R&E if applicable, or the 36-month rule for general software under Pub 946), a standard SaaS subscription like Monday.com is typically treated as an operating expense related to dues, subscriptions, or office/technology expenses.
Manually managing and tracking software subscriptions, including those for platforms like Monday.com, can be inefficient. Fyle offers automation features that streamline this process:
Fyle integrates with major credit card providers like Visa, Mastercard, and American Express. When your Monday.com subscription is charged to a company card, the transaction data appears in Fyle almost instantly, providing immediate visibility.
Fyle can automatically capture and attach e-receipts or invoices for your Monday.com subscription if they are sent to a connected Gmail or Outlook account. This ensures all necessary documentation is linked to the transaction without manual intervention.
Fyle can be configured with rules to automatically categorize Monday.com expenses to the appropriate general ledger code (e.g., "Software Subscriptions," "Project Management Tools") based on the vendor or other transaction details, ensuring consistency.
Fyle offers direct, two-way integrations with popular accounting systems such as QuickBooks Online, QuickBooks Desktop, Xero, NetSuite, and Sage Intacct. This ensures that Monday.com expense data, along with its categorization and supporting documents, is accurately and automatically exported to your accounting software.
With Fyle, you can track your software and subscription spending against pre-set budgets in real-time, helping to prevent overspending. The dashboards and reporting tools provide a clear view of all company expenses, including software costs, allowing for better analysis and decision-making regarding tool usage and expenditure.
By leveraging Fyle, businesses can efficiently manage their Monday.com expenses, from payment capture and receipt management to categorization and accounting sync, saving time and improving accuracy.
.webp)
