Operating a business comes at a cost. These costs include manufacturing, marketing, salary payment, administrative costs, and more. All such costs that organizations incur on a routine basis are termed as a business expense. Although every organization has its own set of expenses, there are some common business expenses that most firms pay. Efficient management of these business expenses helps in increasing profits and reducing your tax burden. Here is a list of some common business expense that must be anticipated and managed.
Every business operates from a tangible space. It may be a part of your home or space at a different location. Hence, costs related to the office space are a common business expense. You may have leased or rented the location, or it may be a mortgaged property. Hence, rent or lease and interest on the mortgage would count as some common expenses.
Utility and Administrative Expense
Apart from location costs, there are other general expenses that businesses incur in their day to day operations. These include utility costs like electricity and water, and administrative costs such as expenses for telephone and the internet, office supplies like pen, paper, and pins, and general property maintenance. If you are operating from home, these costs may vary in terms of the part of your home being used for business. However, these remain a part of common expenses irrespective of the type and size of business.
Payroll and Benefits
Employee salary and benefits make a huge portion of business expenses. Employees are paid as per the payroll system of the company. Additionally, there are certain taxes that you incur plus benefits that you pay to your employees which qualify as common business expenses.
Advertising and Marketing Expense
Advertising and marketing are vital for growth and success of your business. To increase sales and expand growth, businesses use various advertising mediums like television, newspapers, billboards, banners, and digital media. Additionally, having a website has become a necessity today. Website maintenance, advertising, and marketing costs are an important business expense.
Although taxes depend on the type and size of the business, they make a vital part of your expenses. Income tax, self-employment taxes, workers compensation tax, and other business taxes are all vital expenses to be taken note of. However, the tax burden can be reduced by identifying deductions and credits. Consulting a tax professional will help in efficient tax management.
Businesses aim to earn profits. Giving a substantial amount of consideration to managing business expense will assist you in increasing profits. Moreover, most of these expenses are eligible for deductions to reduce your tax liability. Consult an accounting and taxation expert for the best ways to handle these expenses.