Business expenses are ordinary and necessary costs a business incurs in order for it to operate. Businesses need to track and categorize their expenditures because some expenses can count as tax deductions, resulting in significant cost savings.
Business expenses are different from personal expenses. For example, suppose you have a computer for your business that you also use to plan a vacation. The cost of the computer is a business expense, but the cost of the vacation planning is not.
In this guide, we'll give you a list of common business expenses that most businesses incur, along with suggestions on how to categorize them.It's not an exhaustive list, but it should give you enough information to get started tracking your business expenses or begin doing your own taxes as aself-employed entrepreneur.
Expenses can be divided into three categories:
Periodic costs are ones that happen infrequently. Money needed for an unexpected machine replacement or repair, for example, can be difficult to plan for.
A constant cost is one that does not or only marginally changes.An example would be the monthly rent a business pays on its headquarters.
Variable expenses vary from month to month and are often a company’s highest expense. Payroll for a corporation with a large number of freelance employees, or overtime costs, are examples of variable expenses.
Examples of expenses
Insurance for businesses
Payments for commercial liability insurance, disability insurance,workers' compensation insurance, and other types of insurance should all bekept track of.
Permits and licenses for businesses
Include the price of your industry's occupational licenses, healthpermits, and other essential certifications.
Bank fees and interest payments
Any borrowed cash or ongoing credit lines, such as a corporatecredit card, will accrue interest. If you run into bank fees, such as minimumbalance fees or overdraft fees, record those, too.
Internet and telephone
Many companies rely on the internet and telephone to run their operations. Depending on a contract with service providers, these costs are often fixed for a specific length of time. For budgeting purposes, you can also include cell phone plans and long-distance calls in this category. These expenses are frequently deductible.
You can totally or partly claim entertainment charges as an expense, but in some situations, you'll need to pay fringe benefits tax on them too.
Costs associated with the environment
In certain circumstances, you may be able to deduct environmental costs.
Expenses for a home office
You can claim this as a business expense if you're a businessowner and utilize a portion of your family home for work.
Costs of meals
In some cases, if you're self-employed or own a business, you maybe able to claim meal expenses.
Assets with many uses
Calculate how much you can claim for mixed-use assets like vacation houses, yachts, and planes that you use for both personal and commercial purposes.
One of the biggest frustrations for business owners is keeping track of all their expenses. Not only can it be a time-consuming process, but if you’re not in the accounting department, it can also be tedious and confusing.
But there are some things that make expense tracking easier, like understanding just what a business expense is and what you should be tracking.With Lipana you can easily track all your business expenses in our easy-to-use dashboard and watch your business make massive strides.