Business Expenses – What Are They and What Should You Do With Them?
Running a successful business can be very costly. No matter what kind of business you are running, you need to hire a large staff of workers and purchase supplies to help you accomplish all of the tasks involved with maintaining a healthy work environment and a business that flows and continues to make profits.
If you are unfamiliar with what business expenses are, this article will help to clarify that issue for you.
In addition, we will discuss what you should do with your business expenses so that they are not merely claimed as losses on your accountancy records.
Definition of Business Expenses
Business expenses are costs your business incurs whenever you need to purchase equipment and supplies, pay for overhead and staff paycheques, and more.
It is important that you recognize that only those expenses directly related to your business can be claimed as business expenses.
Therefore, make sure you do not mix up your personal and business expenses, and never claim a personal expense as a business expense to get the tax benefits.
For example, if you purchase a computer for your home office, don’t claim that it is for your business office. Doing so will make sure you don’t run into any trouble in the long run, especially in the event of a formal audit by the government.
Examples of Business Expenses
Some of the very many examples of business expenses include, but are not limited to, rent bills, which are typically paid monthly; advertising and promotional costs that are used to market your company to the public; supplies and equipment used in your factory, office, warehouse, etc.; costs you incur to provide goods and services to the public, such as the purchase of inventory; and, of course, the cost of your employees’ labour in the form of payroll.
Your business expenses will vary depending upon many different circumstances, such as if you offer different services and products at different times of the year, or if prices and taxes go up.
Never expect that your business expenses will always remain the same, nor make decisions for your business’ future based on the costs of current expenses. Because prices and costs fluctuate, rising and falling depending on economic conditions, you need to take care whenever you make projections for your business’ future.
Always consider the rising costs of goods and services in the external environment when determining where you want to take your business in the long run.
What You Can Do With Business Expenses
When you realize how much money your business spends on expenses, you may wonder what you can do with those expenses.
The best thing you can do is claim them on your taxes as deductions. As long as your business keeps proper track of its expenses each year, and these expenses are ordinary and necessary, you can claim them as deductions on your tax return forms.
Business expenses are deducted from your company’s taxable income. If you can reduce your taxable income by showing the money you had to spend to make profits, you will owe fewer taxes to the government.