10 Small Business Expenses To Be Aware Of

Business Expenses

If the thought of starting your own business and being your own boss is something you’ve always wanted to do, it’s wise to first understand all of the expenses. Your start-up dream may turn into a nightmare if you don’t have the financial resources to keep the business running. Some overlooked expenses include:


It all starts with the permits and licenses you might need to do business in your community. These are rarely one-time expenses. Factor in how often they need to be renewed and what the renewals will cost.


A home office can work for many start-ups, but zoning and other regulations might require you to have something more official. Before renting office space or purchasing property, think about how much space you need now and what you’ll need once your business starts to grow. Utility costs can also eat into your budget. Leased spaces often include these costs as part of the agreement; however, things can be a little tougher if you’re on your own. Look into utility providers that offer options such as flex-pay, competitive rates or budget billing, and energy audit programs that can help improve your business’ energy efficiency and offset the cost of improvements.


The tools you need for your small business to create a product or run a service should be known to you, but smaller equipment costs can be forgotten in the mix. Remember to include basic office equipment in your budget, items like computers, copier, paper, scanner, desks and chairs.


The people that help your business run significantly impact its potential. Salaries, personal and medical leave, health insurance and training costs factor into the budget. Failing to invest properly in your employees, providing a living wage, a clean environment, office perks and other benefits can lead to high employee turnover. Furthermore, it costs about one-fifth of a worker’s salary to replace that person when they leave.


These will be the most important checks your business will write every month. At minimum, you will need both employer liability and public liability coverage. It’s also a good idea to carry insurance for negligence, property, illnesses and injuries. It’s also a good idea to periodically review your coverage to see if it still meets your business needs.


Shrinkage refers to a loss of inventory at some point between its purchase from your supplier and its purchase by your customer. According to Fortune, retail shrinkage cost U.S. retailers approximately 1.4 percent of their total sales – roughly $32 billion per year. No one plans to lose inventory, but causes for shrinkage can include short shipments from a vendor, picking errors that lead to customers receiving more than they ordered, damaged goods, or theft.


Lost revenue from shrinkage isn’t the only financial pitfall that can hit small businesses. The books suffer when demand gets fulfilled but payment gets delayed. Customers forget to mail the check. Banks hold transactions over a certain amount. Holidays cause payments to post later than expected. Your payments, on the other hand, never seem to miss a date. Payment delays can seriously hurt your financial bottom line, especially when payments are expected or necessary to cover costs. Bounced checks and overage charges chip away at your credit rating. Limited funds can force you to decide which bills to pay. Even with payment delay problems, payroll, insurance, rent and utilities MUST be covered – no matter what.


Your time is a valuable resource, and you can’t afford to waste it. Are you spending too much time and energy on business tasks that could be farmed out or delegated to another employee? Are you neglecting yourself, friends or family? The opportunity cost can be too high if you’re constantly putting out fires or balancing books instead of focusing on your well-being and personal relationships.


Legal and accounting fees can run into thousands of dollars annually, but these specialists can save you money and time. Legal professionals can untangle red tape. Accounting specialists can translate tax codes, help maintain accurate payment and inventory records, and find grants to help fund your endeavors.


Can customers buy your product or service with a credit card? Depending on the credit card used, you should expect to pay roughly 3 percent of total charges in vendor fees. Small businesses also need to very careful about using credit to finance expenses or provide cash flow. If you can’t pay your full balance each month, you can easily accumulate unmanageable debt due to late payments, high interest rates and continued reliance on these accounts.

While we mention 10 hidden expenses, in reality, there can be hundreds more. Try to save and set aside 20 percent of your revenue for those “just in case” expenses!

Looking for business insurance? Talk to your local 360 Insurance agent today!

Information from WaspBarcode.com by Brian Sutter

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