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Small Business Expense List

3 minutes Read

Starting and running a business, no matter how small, involves out-of-pocket expenditures. They can be relatively low, or very high, such as you would typically face when starting and/or running a manufacturing facility. But the expenses will be there, and if you don’t consider them when developing your business plan, your business might under perform.

Below, you will find a list of some common small business expenses. There will be some that you might be tempted to ignore if they represent part of your non-business expenditures, and others, such as consumable office supplies, that don’t appear on the list. But you can use this list as a guideline for developing and evaluating the cost of running your business.

Location-related expenses

  • Rent/mortgage – Will you be operating your business out of your home, on property you already own or rent, or will you be leasing or purchasing property? Know how much you can legally deduct from your taxes, and take your rent or mortgage payments into account when calculating the cost of doing business.
  • Utilities – The cost of business utilities is often higher than those provided to residences. Beyond water/sewer and electricity and/or gas, many businesses require more robust communication services, such as telephone and Internet service. If you are doing business from your home, calculate what percentage of those expenses can be rightfully deducted as business expenses. Be conservative in your estimates, and be diligent about documenting the expenses, as this is one of those areas that can be a red flag to the IRS, causing your returns to be audited.
  • Insurance – You will need to insure not only your property, but your business itself, against liability for any damages that might end up being assessed to the business. Beyond protecting your business against a lawsuit filed by someone who is injured on your premises (even through no fault of your own or the business’), you will likely need insurance to cover business interruption due to property damage or even non-performance litigation.

Personnel-related expenses

  • Salaries and related expenses – If you hire employees, there will be expenses significantly beyond their salaries. You will be responsible for deducting and paying such things as income tax, Social Security, Worker’s Comp, and in some cases, healthcare, the latter being over and above the salaries paid.
  • Training and certification – If your business is in a regulated industry, you may be required to ensure your employees’ competence in their positions. In addition, you may face the additional cost of cross-training employees in functions beyond their own, just to ensure that your business continues to function smoothly in their absence.
  • Sick time – Some businesses may be required to pay employees for time away from work due to illness, while others may feel compelled to offer sick pay as a benefit to attract and retain qualified staff.

Equipment and vehicles

Depending upon the nature of the business, you may have to obtain specialized equipment and/or provide vehicles, all of which incur their own specific expenses.

  • Purchase or lease – There are arguments for and against both methods of obtaining capital expense items. Consult with your professional tax and financial advisors to determine which is the better option for your business.
  • Fuel and maintenance – Will fuel be provided by employees (and listed as deductions on their personal tax filings) for employer-provided vehicles, or will they be provided with company credit cards? Either way, accurate record keeping is essential. How will equipment and vehicle maintenance and repair be handled? Come up with a realistic estimate, including an additional percentage for unforeseen expenses.
  • Insurance – Insurance for a commercial vehicle, or any vehicle used in the course of doing business, is more expensive than that for a personal vehicle, primarily due to the naturally higher risk of liability claims in the event of an accident. Be sure to verify the driving records of employees who are authorized to drive company vehicles, as well as the accident history of employees who operate machinery. If an employee has a record of accidents or improper use of machinery or vehicles, allowing that employee to operate equipment or drive company vehicles could leave your company liable, should they be involved in an accident.

Inventory Expenses

Maintaining the right inventory level is always a gamble, particularly in the case of perishable materials or specialty items. There is a plethora of opinions and formulae by which to determine the level of inventory you stock, but that is a topic beyond the scope of an article like this one. Put simply, proper inventory control is a balance between being able to satisfy your customers’ needs on a timely basis, while at the same time, not tying up all your working capital, and ensuring the integrity and usability of your on-hand inventory.

Keeping track of and control over your business operating expenses is crucial to the business’ success. Knowing within a reasonable range what your expenses will be will allow you not only to function efficiently and profitably, but will also give you a better feel for ways in which you can expand or revise your business to meet future market requirements.

 

Photo credit: vinnstock/shutterstock.com

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