How to manage and track marketing expenses

In 2023, companies spent nearly 10% of their revenues on marketing activities. While smart marketing investments can raise brand awareness and grow your business, blink twice and risky tactics can drain your budget with little to show for it.

Our in-depth guide to tracking marketing expenses will help you control costs, stay within budget, and allocate resources more effectively. 

What are marketing expenses?

Marketing expenses are the costs of products, services, and solutions that promote your business and company brand.

The main goal of marketing investment is to increase revenue by attracting new customers. Companies can also use marketing budgets to enhance their public image, appeal to investors, and attract top industry talent.

Marketing expense examples

Marketing budgets account for a multitude of business activities.

In a nutshell, marketing spend can be divided into three segments:

1. People

Marketing expenses include salaries, benefits, employee perks, and taxes a company owes for each permanent or contract employee in charge of marketing your business. This includes in-house marketing teams and employees, marketing agencies, and external consultants. 

2. Technology

This includes subscriptions, licenses, and other fees for different types of tools marketers use. The marketing tech stack can include:

• SEO tools: To improve your ranking in search engines and make you discoverable online.
• Design software: To create different types of visuals for the company’s website, campaigns, ads, posters, and visual identity, among other things
• CRM tools: Customer Relationship Management software stores customer data and tracks the interactions your staff has with potential and existing customers.
• Email marketing software: To build and automate email marketing campaigns and track their success
• Social media marketing platforms: These allow the company to run effective ad campaigns on LinkedIn, Facebook, Instagram, and other social media.

3. Processes 

This encompasses everything related to marketing strategies that help the marketing department run, which can include:

• Researching the market, customers, and competitors
• Marketing strategy development, implementation, and execution
• Setting KPIs and benchmarks
• Analyzing the results and measuring the outcomes
• Writing the reports
• Project management
• Setting up the workflow, rules, and handbooks

3 types of marketing initiatives

As a company grows, marketing budgets increase and promotional activities diversify. Marketing budgets can cover:

1. Traditional and digital marketing

Depending on the campaign goals and target audience, companies can employ a mix of traditional and digital ads to win the market.

If, for example, a company has just launched an online shop, it may advertise it with:

• Targeted social media ads
• Posters and leaflets prominently displayed in brick and mortar stores
• TV commercials
• A mixture of organic SEO articles and sponsored content

2. Hosting and attending corporate events

Company events such as seminars, webinars, and trade shows can help with PR and knowledge sharing.

Companies in charge of the event need to plan and schedule well in advance and pay for the venue, catering, staff, event promotion, supplies, equipment, videographers, speaker fees, and more.

3. Company merchandise and corporate gifts

Marketing expenses can also include merchandise like branded notebooks, backpacks, hoodies, and stationery—which help increase brand awareness and recognition. 

The benefits of tracking marketing expenses

Without the right guardrails in place, you run the risk of overspending on marketing. Underspending can be an issue, too. And some marketing goals take months, even years of steady investment and diligent work to come to fruition.

Tracking marketing expenses will help you find a perfect balance and use your resources wisely. Here are the biggest benefits. 

1. Clear ROI data

Will your investment pay off? Do the results justify the costs? 

Tracking expenses will help you evaluate your marketing investment and can show how much profit a certain investment has brought. 

Marketing expense tracking is especially important for small businesses and startups. The first round of investment from VCs is often spent on hiring a high-quality workforce, product development, and reliable marketing tactics with high ROI (SEO, paid ads, and social media marketing).

2. Preventing tax filing mistakes

Tracking your marketing expenditure can also help you avoid tax penalties.

Let’s take payroll taxes in your marketing department as an example.

A considerable chunk of your marketing budget will go to salaries. For each full-time employee, you need to withhold a certain amount for tax purposes—some of them being:

• FICA taxes (Social Security and Medicare)
• Federal and state income taxes
• Federal and state unemployment taxes

Violating tax laws may result in fines, lawsuits, interest on back taxes, and even jail time.

Tracking exactly how much you spend on employee salaries and how you allocate the marketing salary budget prevents tax filing mistakes. Expense management software can help you comply with tax laws.  

3. Create a realistic marketing budget

Tracking your marketing budget will empower you with the knowledge necessary to make realistic and smart decisions regarding your marketing spend.

4. Strategic planning and data-backed decisions

Rare are the businesses that can afford the spray-and-pray approach. 

Tracking your marketing spend will help you:

• Stay within budget: If you track your expenses diligently, you’ll be able to notice if something is draining the budget, and redirect spending on decisions with higher ROI.
• Secure buy-in: A rock-solid, data-backed plan for success will help you get approval for marketing spending in the future.

How to manage marketing expenses

For stress-free marketing expense management, it’s important to set up a clear-cut process you can rely on; below is a step-by-step guide:

1. Set clear marketing goals

The first step is to tease out your marketing goals and decide what you want to accomplish.

Do you want to get more visibility on LinkedIn? Get more conversions from your blog posts? Improve brand recognition and create a distinct brand reputation?

A clear plan will help you set realistic budgets and measure success. 

2. Create a marketing budget

There are two ways to approach creating a marketing budget:

• Establish your goals first, then estimate the budget that can make it happen. In this case, you’ll start off by picking the staff members, broad strategy, tools, and everything else that requires spending. 
• Decide on your marketing budget first, then determine your spending priorities.

3. Base marketing decisions on data

Tap into the information you have: analyze the data from marketing tools, request marketing employees submit timely reports, and stay on top of your marketing spend. That way, you’ll quickly learn how much of the budget you have at your disposal, and which activities deserve further investments.

4. Categorize marketing expenses

Create an itemized list that accounts for every expense (or customize a marketing budget template), and your marketing budget will reflect your realistic financial needs.

Are marketing expenses tax deductible?

In the US, some advertising expenses are tax-deductible—but it is important to define what the IRS considers an advertising expense.

According to the IRS, some expenses that help bring in new customers and keep existing ones are deductible. These costs must be ordinary (“common and accepted in the industry”) and necessary (“helpful and appropriate for the trade or business”) to be tax deductible.

Usual tax deductible marketing expenses include:

• Salaries for marketing employees and some contractors
• Events intended to promote your business
• PR expenses
• Promotional materials and advertisements (physical and digital)
• “Promoting goodwill in the community,” as defined by the IRS rules.

Best practices to manage and track marketing expenses

Below are tips for how to make sense of your marketing expenses.

1. Use technology to automate tracking 

Spend management software can eliminate manual calculations and the chance for human error when tracking marketing expenses. 

2. Monitor ROI for each campaign 

Put ROI over prestige and experimentation. It’s the clearest indication of when your tactics are working, or when your marketing budget is best spent on something else.

3. Set clear spending limits

Set hard caps on allowable marketing spend. Monitoring how close you are to these limits will help you avoid any costly overruns. 

Take notes of what eats away at your budget the most, and evaluate whether those big ticket items bring the expected results.

Easily manage your marketing expenses with Rippling

Rippling Spend gives companies unprecedented control over their marketing spend. The unified platform streamlines your spend management by combining the four major categories into a single source system.

• Expense management. Custom workflows simplify the process of reconciling and approving expenses, no matter how sophisticated your policies. 
• Corporate cards. Card groups with custom attributes ensure that the right employees can access the right funds when needed. At the same time, spend analytics give decision-makers visibility on their reports’ activity.
• Bill pay. Automatically track and pay bills for essential services with automated invoice routing to approvers and direct syncing with your accounting software. 
• Payroll. Visualize your global payroll spend in a single currency.  

As an all-in-one HR, IT, and finance solution, Rippling also allows you to leverage employee data across functions to automate spend management tasks. Once an employee completes the onboarding workflow in Rippling’s human resources information system (HRIS), for example, you can opt to automatically issue a new corporate credit card.

Marketing expenses FAQs

How do you account for marketing expenses?

Marketing expenses typically fall under operating expenses in a company’s income statement, since they’re considered daily costs of running a business.

How often should I review my marketing expenses?

Review frequency depends on the expense type. Companies should review marketing spend:

• Weekly, for pay-per-click (PPC) ads and social media campaigns
• Monthly, for license and subscription fees for marketing tools
• Quarterly, when assessing your total marketing spend
• Annually, during your year-end accounting close to help with long-term planning

What are the risks of not tracking marketing expenses?

Here are some of the many negative consequences of not tracking the marketing expenses correctly:

• Financial distress
• Stunted company growth
• Ineffective marketing strategies
• Accidental tax evasion leading to penalties

This blog is based on information available to Rippling as of October 30, 2024.

Disclaimer: Rippling and its affiliates do not provide tax, accounting, or legal advice. This material has been prepared for informational purposes only, and is not intended to provide or be relied on for tax, accounting, or legal advice. You should consult your own tax, accounting, and legal advisors before engaging in any related activities or transactions.