11 Business Expense Categories for Small Businesses

As a small business owner, you don’t necessarily have to be a financial expert. Still, with the proper financial management, your business can perform at its best. One way to ensure that you’re running a successful business is to categorize your business expenses.

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As mentioned by Scanteam research, cryptocurrencies (infographic) are becoming a more predominant currency that all companies should consider. There are several business expense categories that companies should consider and ways to categorize them.

Business Expense Categories Explained

Categorizing your expenses can help to keep your business well organized. It also saves you a lot of time when it comes to preparing your tax documentation. You’ll also find it easy to prioritize payments and have a better idea of when they’re due.

To organize your expenses, you can create a business expense categories list by selecting headers to represent your monthly charges. Although each business will have different priorities, here’s an example of 11 expense categories:

1. Marketing

To run a successful business, you’ll need solid marketing strategies. But, this is something that you have to work on throughout. Your marketing category will include advertising costs and promotional material such as posters, brochures, and billboards. It also includes online marketing content and website and social media costs.

2. Bank Fees

When you calculate your monthly bank fees, you need to include overdraft fees, interests on loans, tax-deductible expenses, and account maintenance charges.

3. Insurance

The insurance category includes insurance on your building, merchandise, equipment, and vehicles. If you have employees, you can also include compensation, insurances, and liability costs.

4. Business Vehicles

When including your service vehicle expenses, it’s crucial to remember that you won’t only have to pay for gas. Here are some of the factors that you need to calculate:

  • Mileage and maintenance costs
  • Gas, oil, and tire replacements
  • Yearly registration fees
  • Loan interests
  • Monthly lease
  • Toll gates and parking costs
  • Speeding tickets
  • Insurance

5. Payroll and Compensations

Here you include basic employee salaries and other bonuses like commissions, compensation payments, and perks . Take note of your employment contracts, and include extra costs such as sick days or hiring external professionals.

6. Utilities

When calculating your monthly utility costs, you need to consider rental costs, telephone and internet bills, electricity, cleaning services, trash removal services, and company licenses. If you’re running your business from home, your business cost must be calculated accordingly.

 

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7. Office Equipment and Supplies

When it comes to office expenses, you need to list operational business items such as computers, printers, scanners, and computer software. Office supplies include tangible items like pens, staples, ink, and paper. You can also include office furniture, as it’s tax-deductible.

8. Postal and Shipping Costs

Whether you’re ordering merchandise or run an online store where customers pay for shipping fees, you need to consider other instances that cost your business money. Think about customer returns and small expenses like postal stamps, envelopes, etc.

9. Business Travel Costs

Business expenses include flights, hotels, taxi fees, and business meetings with other companies. You can also include business lunches and long-distance calls.

10. Entertainment Expenses

Although this category is very similar to the traveling section, it’s good to keep it separate. In this way, you have a clear budget that allows you to entertain potential clients. Remember to keep detailed records for tax purposes.

11. Employee Loans

Perhaps you offer employees an advance and expect them to do extra work as a form of payment. However, if an employee pays you back with interest, it counts as a business income.

A Three Step Guide on How to Categorize Expenses

1. Find the Best Categories for Your Business

Depending on your business, you need to determine expense categories that fit your business. For example, suppose you have a bakery. In that case, you may have a dedicated category for kitchen maintenance. In contrast, a graphic designer might have a category for digital services.

2. Review Financial Accounts Regularly

To stay on top of your expenditures, you need to update your financial accounts regularly. Ensure that you’re aware of additional or new fees and keep track of all deductions, no matter how small they might seem.

3. Have a Category for Every Transaction

Keeping your expenses well organized is a top tip for running a successful business. If you have detailed categories, you won’t have trouble assigning payments to the correct category. In this way, you’ll also know where to store the associated receipts and records.

Conclusion

When it comes to organizing business expenses, many entrepreneurs might feel intimidated by the several different aspects of record keeping. But, once you learn how to categorize your expenses, you can keep track of all deductions, no matter how insignificant they may seem.

About the Author

Alex Lysak is the CEO of ScanTeam. I have been working in online marketing since 2011, my main areas of expertise are marketing research, social media marketing, and SEO. During 9 years of experience, I have helped many products and startups to develop marketing strategies and to implement them further.

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