Common and Cumulative Small Business Expenses

Written by Eddy Hood

Small-Business-ExpensesWhen owning and operating small businesses, expenses of all types are to be expected. Anything that is used to assist the business with providing a service or creating a product is generally considered a business expense. Businesses will have expenses that vary greatly depending upon the particular type of services or products that they provide. Businesses in the manufacturing industry, for instance, will have expenses such as the cost of materials and the cost of labor to assemble and produce the product. Other industries will have different expenses; although often times many businesses have several business expense categories in common.

Common business expenses Include:

  • Overhead costs for small businesses - Most companies, including those run from home, are faced with overhead costs. These are the costs associated with the bare minimum functions.
  • Utilities- The area in which work is completed (whether in a home office or in a rented space) requires electricity, water, internet and telephone services for the business to accommodate employees.
  • Supplies- While the specific supplies that are required vary depending upon the business, most small businesses require basic equipment, such as pens and paper. Other common supplies and equipment that are needed include computers, fax machines, and printers.
  • Travel costs- Not all businesses require travel, although, for those that do, the cost of traveling can be a large expense. This category includes the cost of gasoline, airfare, and hotels.
  • Membership Fees/Taxes/Insurance- Small business owners that subscribe to field specific or business publications or those that belong to professional associations can consider the cost of these fees as business expenses. Other field specific small business expenses may include self-employment taxes and professional insurance policies.
  • Advertising- It costs money to tell people about your product or service. Having a great brand and a way to reach an audience can get expensive, but it's a necessary part of doing business. Marketing expenses for small business growth are often tracked by separating them into the types of advertising that is performed.  For example, you may have the following types of business expenses: print, web, PPC, SEO, and more. 
  • Accounting/Bookkeeping Services- The cost of hiring a professional accountant or bookkeeper is a worthy business expense. Using a professional ensures that financial matters are handled properly to decrease the risk of profit loss through a mistake or misunderstanding in paperwork. Often, professional accountants or bookkeepers can also find ways to decrease expenses and increase profits. Keep your accounting expenses categories to a minimum.
  • Legal fees- Lawyers are frequently needed in small businesses to look over contracts and to provide legal counsel about a variety of business issues.
  • Client entertainment- Small business owners often spend a lot of time entertaining potential or long-term clients over lunch or dinner.
  • Payroll- Payroll is often a large expense for small businesses, including those that only employee a few people. All businesses must account for employee salaries and payroll service expenses.

Remember that business expense categories for taxes do exist. It's important to work with your accountant to make sure that you are classifying your transactions in your accounting system correctly so that you maximize your tax strategy.

How Many Small Business Expense Categories Do I Track?

You can create as many small business expense categories as you like, but we suggest keeping them to a simple list.  Doing so will save time on your accounting and make your financial reports easier to read. We work with a lot of entrepreneurs who value data. As such, they create and track hundreds of different types of business expenses. The problem with getting too granular in your expense tracking is that it creates more room for error and over-complicated reports. Keep it simple, and make great decisions.

It is vital for companies to track expenses properly. Properly tracking small business expenses ensures that businesses can accurately identify where money is being spent. Often times these expenses are able to be examined by an accounting or bookkeeping firm to determine how a business can save money in the future. It is necessary that businesses attempt to save money where they can to ensure the success of the company. To track business expenses and determine where your small business can save money and increase profits, contact us today at 1-855-694-4648 or download our outsourced accounting service pricing guide online instantly!

Lean More About Financial Reporting: 

  1. What is an Accounts Receivable Aging Report?
  2. What is an Accounts Payable Aging Report?
  3. What are Cash Flow Statements?
  4. What are Managerial Accounting Reports?
  5. What are the Four Basic Financial Statements?
  6. How to Keep Track of Business Expenses