Running a business takes a lot of hard work and unfortunately, many people become entrepreneurs without knowing the first thing about operating procedures, business expenses, and the type of commercial finance options they can take advantage of when cash flow problems arise.

In previous blogs, we’ve talked about how to watch for the signs that your business has cash flow problems and what cash management mistakes could be causing them. Here at The Commercial Finance Group in Atlanta we prefer to meet small to mid-size business owners before they’re experiencing any of these problems.

As one of the most successful commercial factoring companies in the Southeastern United States, CFG is proud to be the factoring finance provider that businesses turn to when they’re looking to expand, but need alternatives to traditional bank loans. One of the first things that we do when evaluating a company’s application for financial solutions is ask about their operating expenses. We’ve found that a failure to evaluate operating expenses on a regular basis can be one of the biggest things holding businesses back from achieving their goals.

If you’re unsure about how to identify and evaluate your operating expenses, this article is for you! Keep reading to learn more about how factoring from The Commercial Finance Group can help.

What Are Operating Expenses?

Business experts define operating expenses as those in carrying out an organization’s day-to-day activities, but not directly associated with production.” While operating expenses will vary from industry to industry, there are some that can be expected no matter what type of business you’re running. These include:

  • Payroll
  • Sales Commissions
  • Office Supplies
  • Utility Bills
  • Transportation & Travel
  • Amortization & Depreciation
  • Repairs
  • Taxes
  • Advertising Costs
  • Shipping Costs

Why Should Operating Expenses Be Evaluated?

Operating expenses directly impact your bottom line, and failure to evaluate their necessity on a regular basis can set your business up for serious cash flow problems in the future. Most successful entrepreneurs make it a habit to review their operating expenses during budgetary evaluations every quarter. However, we’d argue that especially for new or rapidly growing companies, operating expenses should be reviewed at least monthly.

“How often you review the budget depends on your confidence in the figures and the risk associated with not meeting the budget. For example, if you must meet a certain budget in order to meet your loan obligations, the risk of falling short is high,” explains Entrepreneurship.org.

How To Evaluate Your Operating Expenses

  1. Insurance – Depending on your industry, your business may carry several different types of insurance to reduce liability. Far too many business owners simply accept the insurance policy with the best price, without really thinking about whether they’re getting useful coverage. Evaluating any and all insurance policies every time they’re up for renewal is a great way to make sure you’re carrying acceptable coverage, not paying for coverage you don’t need, and to negotiate better rates in exchange for loyalty.
  2. Rent – In business, location is everything. Are you paying too much for a location that’s less than desirable? Could you save money (or increase revenues) simply by moving your business to a new location? Don’t re-sign your lease out of laziness. Shop around and make sure that you’re planted somewhere you can truly bloom.
  3. Employee Benefits – Attracting and retaining the best employees requires a benefits package, but it’s important to make sure you’re not offering benefits you can’t afford. Benefits packages should be adequate for both the location and industry in which you operate, while also remaining competitive.
  4. Consultants – Certain outside experts are necessary to the success of your business, like a certified public accountant or an online HR management firm. Other consultants, like an interior designer or landscaping maintenance team, might not be as necessary to your company’s operation. Being able to separate necessary consultants from the ones that are performing tasks you could complete on your own is an important aspect of business ownership.
  5. Labor – Your employees are one of your greatest assets, but they can also be one of your biggest operating expenses. Especially with regard to hourly employees, it’s necessary to keep an eye on labor costs. Take a look at operating procedures for each position in your company to verify that things are being done safely and efficiently. During a particularly busy season, like the winter holidays, temporary staffing may be a way to fill a need at lower wages without paying benefits.
  6. Marketing – Many businesses think marketing is something that you can “set and forget” but that’s simply not the case. Marketing efforts must be very strategic, aimed at reaching your audience in the very place that they’re looking for your goods and services. Are you spending thousands on print marketing when your audience mainly searches via the internet? It may be time to evaluate your marketing dollars to trim the fat.

Factoring Can Help You Keep Up With Growth-Related Operating Expenses

If you ever find yourself in need of additional working capital to help you address some of these operating expenses, contact The Commercial Finance Group immediately. Our factoring finance services have helped hundreds of businesses overcome cash flow problems, and we can help you too.