Managing business finances can feel like a game of chess. However, with the right strategy and adaptability, you can ensure your business thrives even when unexpected costs come your way. The simplest means to do this is through mastering the art of budgeting.
The consistency in a budget comes from recurring expenses. When you know what to expect, it becomes easier to plan. It also makes it easier to leave some wiggle room for unplanned costs. This ensures your budget doesn’t run off track.
Read More:
Recurring Expenses Explained
A recurring expense generally refers to the recurring charges you incur while doing business. These predictable and ongoing expenses are the operating costs of your business. For instance, rent or mortgage payments for your office space, utility bills, and salaries to be paid are all regular expenses. These are all examples of recurring expenses which the business incurs.
When you plan for these expenses, you will have better insight into your business’s financial health and can consider future growth. These predictable costs don’t vary dramatically from month to month and are essential to keeping the business running smoothly. Simultaneously, they give you the leverage needed to plan for any unexpected expenses, too.
Examples of Recurring Expenses
Here are some common types of recurring general expenses:
- Rent and lease monthly fees are basic operational costs
- Maintenance and equipment servicing, including routine repairs and upgrades
- Utility bills include water and electricity bills, waste management fees, etc.
- Employee payroll expenses, such as wages and salaries
- Insurance premiums
- Professional services and retainers for legal, accounting, or consulting needs
- Loan repayments and Equated Monthly Instalments (EMI)
- Taxes, including property and business taxes
- Software licenses and subscription services, such as cloud services
Managing Recurring Expenses
It’s important to proactively manage recurring expenses because it helps improve your cash flow and operational efficiency while enhancing financial stability in the long-run. Here are some ways to manage recurring expenses.
1. Track the Expenses
Certain fixed expenses, such as rent and salaried wages, are recurring expenses that typically remain constant over a fixed period. At the same time, other expenses, such as insurance premiums for liability or property insurance, are significant recurring expenses that must be budgeted to reduce financial burden. These are all a part of your expense report.
So, the first step to managing recurring expenses is tracking and categorizing. A review of the past financial statements will give you a list of all recurring expenses. Once the list is in place, categorize them into common overheads such as utilities, rent and mortgage, maintenance costs, insurance premiums, subscriptions, etc.
Having a categorized list of expenses offers a better understanding of the costs incurred at a glance.
2. Perform Regular Audits
You must conduct regular audits to detect unnoticed recurring charges, such as automatic renewals for subscriptions that no longer need to be renewed. You might notice some unnecessary expenses while going through the list and categories of expenses.
For instance, you might notice old solutions that are no longer viable but are paid for, multiple subscriptions for the same service, duplication of similar services, or services that cost more than the value offered.
To ensure the budget created works well to manage your business’s recurring costs, it’s important to weed out those that drain funds without adding any value.
3. Monitor, Review, and Adjust
Apart from all this, it’s important to regularly monitor and review the budget to ensure it works. The budget must be reviewed monthly, quarterly, and yearly to ensure its viability. Recurring expenses are fairly stable, but regular reviews help plan for the future by considering non-recurring ones as well. Following the review, adjust the allocation for recurring expenses where necessary.
A robust expense tracking system can be implemented to monitor recurring charges and ensure they align with your business’s financial goals.
Whether you are an established business or a startup, it’s about budgeting for your business expenses. Once you understand what they are and how to track and manage your expenses them effectively, you can stay financially healthy.
Team up with seasoned buyers and suppliers by sourcing on our trusted e-Marketplace is one way to cost-effectively source without an expensive recurring cost! Start exploring now.
This article is originally published by Aspire:
Aspire is the all-in-one finance platform for modern businesses, helping over 15,000 companies save time and money with international payments, expense management, payable management, and receivable management solutions — accessible via a single, user-friendly account.
Recurring Costs FAQ
1. What are recurring expenses?
Recurring expenses are predictable, ongoing charges that a business must pay regularly to keep operations running. Examples include office rent, employee salaries, insurance premiums, utility bills, and software subscriptions.
2. Why is it important to track recurring expenses?
Tracking these costs gives better visibility of your financial health. Because they repeat consistently, they form the foundation of your budget, making it easier to plan for growth and leave room for unexpected costs.
3. How do recurring expenses show up in financial statements?
- Income statement: Captures recurring operating costs like rent, payroll, and utilities.
- Balance sheet: Reflects liabilities if recurring expenses remain unpaid (e.g., wages payable).
- Cash flow statement: Shows recurring costs as operating outflows, giving a real-time picture of liquidity.
