8 out of 10 small businesses fail due to poor cash flow management.
These businesses often lack enough cash to meet their short-term expenses, such as paying employees. To avoid falling into this pitfall, you must educate yourself on business expense examples. The idea is to learn how various expenses affect business growth and survival.
Besides, you must understand the difference between paying business expenses and liabilities.
To help you out, here are 10 essential business expense examples.
1. Salaries and Employees’ Benefits
You’ll need to hire people to carry out various tasks when operating a business. So, you must take time to search for the right employees for your business. You want to hire talented individuals who enhance business growth.
To keep these employees motivated, you must offer fair wages and salaries. Besides, you should consider offering various employees’ benefits such as dental insurance. The reason you’re incurring these business expenses is to get the best out of your employees.
Being variable expenses, it’s easy to adjust the salaries and employees’ benefits depending on your business needs. So, to expand your business, you can bring in more workers, thereby incurring higher salaries and wages costs. On the other hand, during recessions, you can downsize, reducing the cost you incur on employees’ salaries and benefits.
2. Business Software and Website Expenses
To automate business operations, you’ll need to incur various software and website expenses. These are costs that help your business keep up with the latest digital trends.Automation of accounts payable is one example. When paying vendors, your business should establish a smooth and safer workflow. An automated AP process helps ensure that payments are made on time and in the correct amount. Besides, having a business website is vital to expanding your business reach.
Besides, you may need cloud solutions to access secure data storage. That’s why you should seek tips for cloud cost optimization. The idea is to learn how you can minimize the costs you incur on cloud solutions.
3. Bank Fees and Interest Payments
Many business owners tend to bundle up loan principal and interest into the same category of liabilities. They argue that the business owes the lenders both the principal and the interest. And although this is the case, the loan interest is not a liability but an expense.
It’s the cost of accessing credit and falls under the assets category. So, as you prepare the profit and loss statement, remember to add loan interest. Besides, include the bank transaction fees as they accumulate to a substantial figure.
4. Marketing and Advertising Costs
You need to invest in marketing to get the word out about your business. The goal is to boost brand awareness and generate leads. So, as you develop your company’s budget, remember to allocate money for business advertising and marketing.
Besides, track the ROI you get from various business marketing campaigns. The idea is to get rid of all marketing channels with a negative ROI. You want to stick only with marketing strategies that increase leads and give your enterprise an edge.
5. Business Taxes
The other business expense example is the IRS’s different taxes on companies. So, if you’re planning to start a business, you need to learn more about these taxes. You want to know the total taxes your business is required to pay depending on the revenues you earn.
Also, look for resources that educate you on the deadline for filing and remitting business taxes.
6. Office Supplies
To smoothen business operations, you must in various office supplies such as computers and stationery. It’s easy to underestimate the cost of office supplies and feel like they’re a minor expense. Yet, these costs build up to a huge figure in the long run and may get out of hand if you’re not careful.
That’s why you need to create an office supplies budget for a given duration. You want to specify how much money you’ll spend on supplies such as stationery and computers.
7. Office Rent
You may need to rent out office space to operate a business. So, as you add up fixed expenses, remember to include rent. The reason is that the rent you pay is not influenced by output.
So, even if you double your sales, you’ll still pay the same rent amount as before.
8. Professional Services
When operating a business, you’ll need to source for various professional services such as legal and consulting services. The idea is to leverage the expertise of various business gurus to enhance business growth. And that’s why it’s worth incurring the costs of various professional services.
9. Assets Depreciation Cost
Most new entrepreneurs don’t know how to deal with equipment wear and tear, which decreases assets value. These entrepreneurs don’t know the best accounting methods for calculating depreciation. Besides, they’ve no idea whether to treat depreciation as an expense or liability.
To overcome this challenge, realize that depreciation is a business expense. To deal with this expense, learn how the provision of depreciation works.
10. Repairs and Maintenance
The other type of business expense is the repairs and maintenance costs. With time you’ll need to maintain and repair your business vehicles. So, to avoid problems, allocate funds for repairs and maintenance.
You want to avoid a situation where a business car or equipment breaks down, and you don’t have the funds to repair it.
Overcome Cashflow Problems by Learning Business Expense Examples
To ensure your business survives, you must learn how to mitigate various cash flow problems. That’s why you need to educate yourself on the above business expense examples. You want to learn how to handle these expenses best to enhance business growth.
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