Whether you’re running a retail store or an online business, there are several business expenses you will need to plan for over the course of the year. Most business owners incur several expenses beyond rent and utilities for the office or property each month. Knowing what these are ahead of time can make it easier to project long-term costs and profits, and set your financial goals.
As a small business owner, I learned early on that tracking all of my expenses made it easier to create a budget for each quarter. Keeping an accurate record of business expenses also helps when you’re filing your taxes because many expenses are deductible. If you’re a small business owner or are in charge of handling the accounting for a small business, you can expect to incur the following types of expenses:
1. Salaries, benefits and payroll taxes. If you have employees, you will need to budget for salaries and wages, employee benefits and payroll taxes. These amounts will vary significantly depending on the type of help you are hiring and the number of employees you have. Employee-related expenses are among the largest business expenses you’ll incur, so make sure you budget for these expenses as accurately as possible.
2. Advertising and marketing expenses. Every business spends money on advertising and marketing, whether it’s in the form of actual marketing materials or by spending time executing free and grassroots marketing efforts. Allocate a portion of your budget for advertising and marketing, and keep track of everything you spend so that you can report it accurately on your tax return.
3. Insurance. Most businesses that operate stores, have several employees, and those that work in multiple locations will need insurance to protect their property and employees. You’ll need to account for this expense when calculating your total operating costs.
4. Cost of goods sold. If you are in a business that buys and sells goods, or makes goods for sale, you will be able to deduct the cost of goods sold on your tax return. This is considered to be a business expense and you’ll need to set up a system to track your inventory and related costs as accurately as possible.
5. Office and supplies expenses. Anything you purchase to keep your office running can be classified as a supplies expense or other type of business expense. Keep in mind that this expense is different from the cost of goods sold. These expenses may include the purchase of computer equipment and accessories, A/V equipment, paper, pens and pencils, and other supplies. Keep track of all of these purchases over the year so that you can report this expense accurately.
6. Travel expenses. If you and your employees need to travel to different office locations each month, attend meetings at a different location or go to tradeshows, you’ll need to account for this expense. Travel expenses may include transportation, gas and even meals and entertainment – as long as these expenses are not extravagant in nature.