List of Monthly Expenses for Small Business
May 16, 2024
In the small business world, keeping track of expenses is crucial. It helps you maintain financial health and plan for growth. Yet, 50% of small businesses operate without a documented budget, with small businesses being the least likely to have one. However, those that have a budget usually adhere to it.[1]
Knowing your monthly costs is key to effective budgeting, whether you're a startup or a veteran small business owner. Let’s look at the expenses your small business might have and how to manage them.
What are the Monthly Costs for a Business?
Running a business involves recurring expenses that can be categorized into different buckets. These costs typically include overhead, personnel, goods, marketing, and administrative expenses.
Learn which expenses fall into each category:
- Overhead expenses are the fixed costs required to keep your business operating.
- Personnel costs refer to the money you pay employees or staff. If you have employees, their salaries or wages, payroll taxes, and benefits fall into this category.
- Cost of Goods Sold (COGS) refers to the price of materials, manufacturing, and inventory.
- Administrative expenses include costs related to office supplies, software subscriptions, professional services, and travel.
Transportation expenses are administrative costs when they support employee travel and office operations. However, they are overhead costs when used for essential business operations.
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How Do Small Businesses Keep Track of Expenses
Efficiently managing business expenses requires an organized approach.
Here are steps to help you keep track:
- Separate your personal and business finances to simplify tracking and reporting.
- Categorize your expenses into different categories, such as rent, utilities, payroll, marketing, supplies, insurance, professional services, and taxes.
- Document each expense item under the appropriate category. Note the amount spent, the transaction date, and the expense's purpose.
- Keep all receipts, invoices, and bank statements physically or digitally organized. Some accounting software allows you to upload and store receipts.
- Use accounting software like QuickBooks®, FreshBooks®, or Xero® to automate expense tracking and categorization.
- Monitor your profit and loss statements, balance sheets, and cash flow reports.
Understanding your business’s financial health is important. These measures will keep you on course. By implementing these practices, you can effectively manage and track your expenses.
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Essential Small Business Expenses List
There are specific monthly expenses that most small businesses need to keep a close eye on. While they may vary based on your operations, they typically appear in one way or another. Here are the seven basic small business expenses to track.
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1. Rent or Mortgage Payments
Rent or mortgage payments for business locations can vary significantly depending on the size and location of the space. In places like South Bend or Indianapolis, commercial rents tend to be more affordable compared to larger cities.
For home-based businesses, it's important to calculate the portion of their personal home or mortgage that directly supports their business operations. This can help in accurately accounting for business expenses and potentially qualifying for home office tax deductions.
2. Utilities for Business
Utilities such as electricity, water, and internet for business usually cost between $200 and $1,000 per month. This depends on usage and location. If you have access to multiple providers, be sure to shop around for the best prices.
Indiana offers competitive utility rates, which is advantageous for businesses in our state.[2]
Like with rent or mortgage, home-based businesses should allocate a portion of their personal utility expenses to their business budget. This helps accurately track and manage expenses. It can also be beneficial for tax purposes, especially for those claiming home office deductions.
3. Payroll Expenses
Payroll expenses, including employee salaries and benefits like healthcare and retirement plans, vary depending on industry and location. Typically, around 38% of payroll costs are allocated to benefits.[3]
Indiana's average wages are slightly lower than the national average, which might be attractive to business owners.[4] Paying higher wages might give you an edge to obtain better-qualified candidates.
If you don’t have employees, hiring freelancers or contractors should be categorized as professional services rather than payroll expenses, ensuring accurate financial tracking and reporting.
4. Inventory COGS
COGS represent the direct expenses involved in goods production or supply. Businesses in areas like Valpo or Fort Wayne may experience lower supply costs than larger metropolitan areas. This can be advantageous for managing overall inventory expenses and operational budgets.
Optimizing your inventory costs can help you optimize your supply chain and budget effectively. Shop multiple suppliers and manufacturers to find the best deals. Consider your local economy when you think about outsourcing out of state.
5. Business Marketing and Advertising
Marketing and advertising expenses, particularly in digital marketing, can vary from a few hundred to thousands of dollars per month. This usually depends on the scope and platforms used. Small businesses may benefit from a mix of digital and traditional methods.
Leveraging local events such as the Indy 500 or the State Fair can enhance your marketing efforts. With local advertising, you tap into regional audiences and community engagement. This can maximize the impact of advertising budgets for businesses in the area.
Understanding these costs can help you make marketing decisions that align with your budget and goals.
6. Insurance Premiums
Insurance premiums for businesses typically include:
- General liability insurance, which ranges from approximately $500 to $2,000 per year.
- Property insurance, which varies based on property value and coverage.
Understanding insurance costs and local offerings can help businesses protect their assets and manage risk effectively.
7. Professional Service Expenses
Professional services like legal and accounting fees can range from $75 to $300 per hour. In Indiana, there is a growing community of small business service professionals.
Local professionals can provide expertise tailored to the unique needs of businesses in the state. Shop around for cost-effective solutions for legal, financial, and other technical needs. Consider local contractors and freelancers for specialized needs within your company.
Understanding local resources and expertise can help you make informed decisions and effectively manage professional service expenses.
Optimize Your Small Business Monthly Expenditure Plan with Centier
Understanding and managing your small business expenses is critical for sustainable growth and profitability. By categorizing your costs, you can optimize your budget. By considering local solutions at every touchpoint, you allocate resources responsibly and contribute to your regional economy.
Ready to get more from your business finances? Check out Centier Bank’s small business banking solutions.
Sources:
[1] https://clutch.co/resources/how-small-businesses-budget
[2] https://www.chooseenergy.com/electricity-rates-by-state
[3] https://www.bls.gov/news.release/pdf/ecec.pdf
[4] https://www.bls.gov/regions/midwest/news-release/countyemploymentandwages_indiana.htm
