![]() For instance, medical facilities and law offices are often required to carry malpractice insurance to cover their staff. In addition to insurance that protects business property, many organizations require insurance on personnel or the company itself. Some other employee-related G&A costs include relocating a new hire and paid travel for job-related training. In addition to an employee's actual pay rate, costs like paid time off, health insurance and training also qualify as G&A. Salaries and wagesĮmployee salaries and wages are other major components of general and administrative expenses. Even minor operating expenses like lawn service and cleaning fall in this category. Utilities are also common costs, which include electricity and water. Rent or mortgage on the building is one example of any property insurance the organization holds, such as fire and flood. Types of General Expenses Building expensesīuilding expenses pertain to any costs related to operating the facility that houses the company. Subscriptions (i.e., publications, software, services).Together, general, selling, and administration (SG&A) expenses make up a company’s operating expenses. General expenses are the costs a business incurs as part of its daily operations, separate from selling and administration expenses. That’s calculated by dividing the total cost of getting customers by the number of customers acquired for a given period. Start to develop KPIsĪccurate selling costs help the business work toward getting key sales metrics such as the Customer Acquisition Cost (CAC). Accenture research shows that travel expenses comprise 10% to 12% of a business's annual budget and represent about 1% of its revenue. While the general and administrative bucket is often where companies start cost reduction measures, the items in the selling expense bucket are the biggest opportunities to better control costs.įor instance, travel expenses are a selling expense that represents a cost-containment opportunity. Tracking selling expenses is important for tax compliance and for ensuring the business is correctly calculating deductions to reduce its tax burden. Benefits of Selling Expensesīy tracking selling expenses, a business can: Correctly assess its tax burden However, within the SG&A bucket, one study showed that best-in-class wholesale distribution companies concentrate spending in the selling category, including making investments in the sales force, account management, and technology to support it all. It will differ according to the industry as well as the consistency of the gross profit number overall. There is no hard and fast number on what that should be. ![]() Divide SG&A by gross profit (revenue minus the cost of goods sold) to get the percentage of the gross profit that is going into SG&A expenses. One way to use selling expenses as part of profitability analysis is the ratio of SG&A to sales. Controlling these costs as demand for products or services grows is crucial to a business's profitability, but finding a balance is crucial to sustaining that growth. Their mention is a staple on earnings calls, lately in the context of a phrase like “discretionary spending cuts” in relation to those line items. In addition to reducing labor and materials costs, SG&A expenses are an excellent place to look for savings opportunities because they take up so much of a company’s operating budget.
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