Every Business needs to keep tight control of operating costs to maximize profit and cash flow. If you want to retain money in your business, you need to know what you are spending and how much you are spent. there are One of the most effective ways to do this, by categorizing expenses in your small business. also, You can categorize that by preparing a list of popular charges that can be assign. Categorizing cost will helpful to your money in budgeting, assessing tax base as well as assessing profit and loss in your small firm. so now we go to the discussion How To Categorize Expenses For Small Business


  1. Decide what are the right categories for your special expenses
  2. Each time you spent money for any expenses, determine why you are spending money and for what you are spending.
  3. Assign  that transaction to a category
  4. Reconcile your bank account regularly
  5. Use these categories for accounting and it will make it easier to prepare tax-related documents


Here a list of categories of expenses that you can assign spending and You can learn How To Categorize Expenses For Small Business

Payroll and salary cost

Wages for the staff are main and the biggest expense to most business. but If you concern about that main cost element, which can help you to develop cost reduction strategies for the future.

Business vehicle Expenses

If your business is distributing related business, vehicle expense is the cost element. As well as if you use vehicles to help run your business. You should categories vehicle-related expenses like fuel, maintenance, repairs, and other related necessary automobile costs.

Office Expenses

Office Expenses are common costs that are necessary to run the business like purchasing office furniture and office equipment. that furniture includes, the cost of desks, chair, filing cabinets, and other things you spend money on office furniture. And also you can categorize an expense as office equipment, like computers laptops, mobile phones, printers, fax machines and you use to run your small business.

Office Supplies and sundries

This category includes tangible items like pens, copier paper, staplers, documentary and printing stationeries, toner cartridges, and similar expenses.

Employee benefits

Employees are the main factor in the business if the business is small or large. Ever had a friend or business contact who says “The benefits at my company are great”. Employees are talking about additional benefits on their jobs that are not wage-related. Generally, employee benefits include

  • Retirement benefits
    • Education, training, and conferences
    • Health, insurance (Dental, Life, and disability)
    • Paid Holidays
    • Child cares
    • Fitness and Nutrition

These benefits are given for mental happiness to the employee and people also attract to the business.

Utility bills, Communication and internet expenses

Money that you spend on bills for telephone, gas, water, electricity, etc., therefore, these telecommunication and internet expenses are the main cost element to the business and you should include fees for broadband and other payment to get online facilities.

Maintain and repairs

You can spend money to keep your business place in good order. Those expenses include paintings, Replacing bulbs and lights, Cleaning, Building repainting, repairing equipment, and other similar expenses. these expenses are most important for the survival of the business.

Health and other Insurance

You can categories the premiums you pay for health and insurance. For example fire insurance, Building insurance, motor vehicle insurance, and labor compensation insurance and other insurance expenses, etc.

Meal and Entertainment

Some Business provides a meal to staff like breakfast, lunch, dinner, and tea expenses. Entertainment events such as concerts, treating dinner parties, Sporting events, also include this category.

Entertainment events give heavy motivation towards the workers. Because it decreases the stress of staff and gives relax the mind to them. if they have a relaxed mind, your business is successful.

Professional Services.

If you pay money to an accountant, lawyer, or other professional, include this category. As well as membership fees, professional association and publications, tradesmen, security, marketing consultants, all of these would be considered professional services.

Advertising and marketing expenses.

Advertizing expenses should include any amount you step to promote or advertise your business and product on television, newspaper, magazines, billboards, radio, and internet, emails, And this category include charges related to online ads, social media, or marketing. this is most important for improving sales.

Rent or mortgage payments.

During the business process you should pay money for office lease, rental, or purchase expenses and That type of expense includes this category.


  1. Fixed expenses
  2. Variable expenses
  3. Periodic expenses

Fixed expenses are expenses that do not change for a long time or Long time means not change within one year. Variable cost means expenses that change month wise like meals and utilities. also, Periodic expenses mean raises periodically, like an annual trip, vehicle repairs, etc.


  1. Utility bills (Telephone, Water, and Electricity, etc.)
  2. Business-related trips
  3. Vehicle expenses and Fuel
  4. Office Supplies, Including Software’s, Computers, etc.


  1. Cost of goods sold (COGS)
  2. Administration expenses (Salaries, R&D, Travel & Training, IT Expenses)
  3. Financial expenses (Loan origination fees, Interest expense)
  4. Selling and Distribution Expenses. for example Commissions, Cost of advertisement, posters, Cost of price list and catalogs, After-sale services, Cost of storing, Cost of warehousing, Cost of packing, cost of delivery

Thank you for reading my article and I think u also know about How To Categorize Expenses For Small Business meaning. If you like to learn how to promote your business from Facebook click here and read it.

By Samitha Sanjeewa

I'm an article writer and businessman.

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