Common business expenses and how to manage them?
A business cannot just start operating in the market, and make sales and expenses without knowing the basics of everything.
Cost cutting, better investment opportunities, efficiency, etc., are important business performance metrics; how would you calculate these for your business without having ground-level knowledge about the variables required?
Expenses are the variable that tells how much money is being spent by the business, and having an understanding of the most common business expenses will help you make smart and profitable decisions.
Let's begin with the business foundation: rented business premises. If your company offices or business premises are not personally owned, this means you are renting them, and rent is considered an operating expense.
You are required to pay rent at regular intervals to be in possession of that space, and rent is considered to be a significant expense. To save a little on the rent amount, you can set up your offices in estates that charge lower rents.
Another important yet common business expense is inventory and business utilities cost. Inventory is both the largest operating expense and the most significant asset on your balance sheet.
Along with this comes other operating expenses, which are counted under utilities. This is the expense made on buying daily use materials like computers, office stationery supplies, water, electricity, etc.
Types of business expenditure also include the cost of human resources. This means the salaries and wages paid to the employees of the company in accordance with the payroll system.
This does not just end on salaries; human resource expense also includes bonuses, rewards, gifts, etc. Plus, if you outsource any work, the money given to those people is also an important-to-consider common business expense.
Businesses have or specifically create a marketing budget because to stay alive in today’s competitive world, marketing and advertising are basic needs.
You can only sell your product when your target audience knows about it, and that happens through marketing. Hence, whether you choose to market and advertise online or offline, or maybe both, there are a significant amount of expenses attached to this category.
The revenue earned by your business is the basis on which you pay taxes. Understanding the taxes and taking advantage of the deductibles is how taxes are managed smartly.
So the GST/VAT and other income tax payables are also counted under types of business expenditures.
Amongst other common business expense categories is business travel expenditure. It is not necessary that all businesses would have high travel expenses.
However, if your business does, it is advised to keep a track of all the aspects. Hotel stay prices, airfares, food and beverages cost, entertainment cost, etc.
Insurance is a basic and one of the most essential requirements of a business. It is a safety belt for difficult times, like accidents, calamities, and financial emergencies.
Getting business and employee insurance should be the first thing done before making plans to generate profit. So, business insurance expense is again from the common business expense categories.
The first step towards controlling common business expenses is making a financial plan. Once you have your expense categories sorted, you need to sort out which expenses can go to which limits.
This can be done by evaluating your company’s needs and then setting a budget for each common business expenses category.
You can plan your future expenses only when you have a base to compare it with; this base comes from historical data; collect historical expense data and then plan your future expenses of business according to that baseline.
Variable expenses are those which change over time and depend on the business's consumption of any products or services.
These vary with time. Hence, you need to anticipate your variable expenses as well to manage the overall business expenditure to a profitable limit.
To plan and adapt according to modern times, your business needs smart tech solutions and software for management. Adopt technologies that help the business induce more efficiency, decrease expenses, and overall help in effective cost management.
It is not just technology that can help to reduce expenses and bring more uniformity into the system; your company’s employees are also an integral part of the process.
Hence, the employees who prove to be helpful in the process reward them. This not only encourages them to do more, but it also motivates the other employees to do the same.
Any expense management software you adopt should have the best features and the ones which align with your business needs.
That one software is Volopay! An excellent expense management software that facilities your business with features like:
• Real-time visibility of all transactions
• Accurate expense list and categorization
• Instant flagging of any anomalies and errors in data
• Automated approval workflows
• Simple and easy-to-fill digital claim forms
• Department-based spend analysis reporting
• Direct accounting integration with major software
• Easy-to-use mobile app for reimbursement claims and approvals
• Corporate cards, both virtual and physical, and much more
Enhance your business productivity by simplifying expense-related functions. Reap all the above benefits of expense management software with Volopay.
All capital expenditures are taken for business purposes, given that the business starts its operations within a given period of time. However, no capital expenditure over rs.10,000 will be deductible if undertaken in cash.
Yes, expense management software is built to provide efficiency and security. However, it is advised to check and take demos of software before implementing anyone, to be double sure.
There are various ways to avoid unnecessary expenses. For example, creating an expense plan, adopting expense management software, managing variable costs, and anticipation of possible future expenses.