Money is slippery: this minute, you have it with you; the next minute, you don’t have it again. When running a business, money is a vital factor; you have to keep track of it going out and coming in. There are expenses that arise in the course of doing business. These expenses are mostly inevitable. However, they can be quite many. It takes prudency to keep track of all expenses, remove it from the gross profit, and see how costs can be cut or more profit made to make up for the list of expenses.
These expenses will be discussed below.
This is the sum total of expenses paid to account managers and also for audit. Accountants work in managing your account and giving you advice on steps to take when it comes to money. The fees of accountants are billed by hours of work. Their advice can be very useful in helping you stay financially fit.
The money spent on advertising is an investment and as such must be documented. Advertising can be done via mass or social media. It could also be both. However, many spent on advertisement may be quite much as reaching customers in the 21stcenturies requires a lot of strategies.
Commissions and Sales Expenses
This cost will occur when you engage the services of sales agents and representatives. They are working and as such, they are entitled to payment. This adds to your expenses. Sales expenses also cover some incidental costs incurred in the process of making sales. For instance, an example is the transportation allowance given to sales agent to penetrate local markets.
To get things done better, business consultants and other professionals are needed for their services. They charge mostly hourly. This is also a cost that is incurred in the process of running the business. Every dime spent here is an investment in the business. It is advised that consultants be hired by their success rate and experience and not particularly by the money they charge.
Contract Labor Costs
You can’t always do all the work yourself. There are periods you will need to contract a particular job to other business. When this happens, you have to incorporate the costs of contract labor with normal labor cost. All these will have to be deducted before the actualization of the actual profit margin. Depending on what you want, contract labor may be cheaper than employed labor.
Continuing Professional Educational Expenses
Learning is a lifelong process. In your business, you have to learn new ways of doing things so as to get better. Research, findings, and analysis are conducted in practical situations by experts to draw up useful theories which are highly beneficial to business. You have to key into it. You also have to get your employees to keep learning. Many businesses subscribe for their employees. You get to reap the benefits in the long run. This also goes into costs.
Employee Benefit Programs
Getting the best out of your employees require motivation. Motivation may comprise perks, bonuses, stocks, free tickets… anything that will tell your employees you appreciate their hard work and you encourage them to do more. Many times, employment benefit programs costs are added to labor cost as they relate to what is given out to employees.
Credit and Collection Fees
These are costs incurred to collect debts. As a business owner, going out to collect debts owed you may not be effective. However, there are collectors whose jobs are to collect these debts. Their commissions, known as collection fees, are removed from the debt collected. Collection fees may be varied with the debt owed and by the agreed percentage of the collector.
Office Expenses and Supplies
Every now and then, things need to be changed in the office – new office furniture, stationeries, new fixtures, etc. they may seem little but they add up to sizeable sums. They are cost incurred in the course of doing business and as such be added up. There should be a column in the expenditure form for offices expenses and supplies. The rents paid for the office space are also office expenses.
Quite a lot of money is spent here. This is where production happens. There should be a factory manager who takes note of everything that goes in and out of the factory. This is applicable to the money spent. Fuel, accommodation for factory workers, service of machineries, new equipments, and many other necessities take out money in factories. There should be an aspect in the expenditure form for factories that will cover unexpected events. Though, this may be seen as miscellaneous but a little higher than miscellaneous may be needed.
To carry out some aspects of business like factories, restaurants, etc. licenses are needed. These are governmental permits which are renewed with periodic payments, else, the license expires. Just as taxes, governments don’t joke with their sources of revenue. Thus, they are bound to come after your business for non-payment. In the light of this, money for the renewal of licenses must be budgeted for.
Professional Developments and Training Fees
Take for example you have a sales department. You have to keep training your sales agents and representatives on how to get more sales. The money for this has to be included somewhere. More, departmental heads and team leaders also need professional leadership development.
Salaries, Wages, and other Compensation
These are your main labor costs. Your labor costs cannot remain stagnant for a long time as salaries and wages will have to increase to meet current economic realities and minimum wage adjustments. These costs should rank high on your expenditure list.
These are things needed to make your business run smoother. This can cover power, water, heat, etc. These are also to be included as their absence can hinder a lot in the business.
In conclusion, you can’t afford to keep spending and not have it documented or envisaged. Your budget should plan for unexpected events and eventualities; at the same time, recurring expenses should not be neglected.
The Local Retail Pharmacy Association of America is here for all of your OTC retail pharmacy needs. Hopefully you have found value within this article on the Deductible Business Expenses.We are interested in what you would like to learn more about, please let us know in the comments below.