This article contains general information and is not intended to provide information that is specific to American Express, or its products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.
Recurring Expenses Definition
Recurring expenses are your business’ ongoing costs. They’re the expenses you must pay regularly to keep your business running smoothly. You might pay recurring expenses weekly, monthly, bimonthly, or quarterly.
What are examples of recurring expenses?
For some businesses, recurring expenses may make up the bulk of their operating costs. Here are some examples of recurring expenses to consider:
- Rent or lease payments
- Mortgage payments — if you own your premises
- Utilities
- Employee payroll
- Taxes and insurance
- Marketing and advertising costs
- Website hosting and email service fees
- Professional services — such as quarterly tax preparation or payroll management
- Subscription services — like cloud accounting software or collaboration software
Recurring expenses may show up on key financial documents, including your balance sheet, cash flow statement, and profit and loss statement.
Recurring Expenses vs. Non-Recurring Expenses
Non-recurring expenses are often one-time expenses. These are infrequent expenses that business owners either do not expect to continue over time or will not be paid on a regular basis. Examples of non-recurring expenses include:
- Real estate
- Renovations of your facilities or office space
- Equipment purchases
- Repairs after a natural disaster or accident
- Mergers and acquisitions fees
Non-recurring expenses may also appear on the same financial documents as recurring, though not as frequently.
How to Track Recurring Expenses
Tracking recurring expenses is an essential part of managing a business’ finances. It’s important for both an established business and those just starting out.
When a business owner keeps a close eye on recurring expenses, they may have a better understanding of their operating costs and may be more flexible when facing unexpected expenses.
Thankfully, technology offers business owners several avenues to organize the management of recurring expenses. From autopay services to digital cash flow management tools, a business owner can easily manage their recurring expenses.
Pay recurring expenses with autopay
Autopay allows you to schedule bill payments from your business bank account. For example, you could schedule an automatic payment for utility bills from your business checking account on the same date each month.
Utilizing autopay may help you avoid late payments, which might trigger fees and add to your overall costs. Paying certain bills late, such as a small business loan or line of credit, may also impact your credit score. If you’re paying suppliers late, you may not be able to access key materials, further affecting your business.
Keep in mind that autopay may not make sense for every business or every bill. Consider your business’s needs and goals before you set up autopay.
Use a recurring expense tracker
You may use an online analytics tool to take a deeper dive into managing your cash flow. The more data you have about your spending patterns, the more you may be able to understand your financial picture. These patterns and insights could help you make informed money in, money out decisions with confidence.
Risks of Mismanaging Recurring Expenses
It’s important to keep tabs on your recurring expenses and any automated methods you have in place to pay them. Dropping the ball on recurring expenses might lead to multiple problems for a business.
- Cash flow issues: Losing track of recurring expenses could impact your cash flow if you forget to include them on your monthly expense sheet. You might be used to seeing the same expenses drafted from your account each month and may need to adjust the cash you keep on hand.
- Varying bill costs: Recurring expenses may fluctuate from month to month. Utility bills, for instance, might be higher in the winter or summer months and lower in the spring and fall.
- Timing of withdrawals: Depending on the steadiness of your cash flow, you could end up with a funding shortfall. If the money you’re expecting hasn’t arrived, you may need to reschedule or cancel recurring payments to avoid overdraft fees.
- The cost of subscriptions: Even if the price increases $5 a month, you may eventually see higher prices across all your subscriptions, which can add up. You could miss those changes if you set expenses on autopay and aren’t checking them regularly.
Staying Ahead of Recurring Business Expenses
Recurring expenses aren’t always static. Inflation can cause increases, while changing provider policies may trigger higher prices. Here are a few tips to handle climbing costs:
- Review your recurring expenses to track cost changes month to month and year to year.
- Consider shopping around for new service providers if you think you could get a better deal on certain recurring expenses.
- Fine-tune spending controls on employee credit cards to better control their use.
- Conduct an audit of subscription services to see which ones you might be able to eliminate.
- Ask service providers about any discounts they might offer for using autopay.
Using a tool to help you track your recurring and non-recurring expenses can help you make more confident financial decisions. For example, you could explore your cash flow analytics with the American Express Business Blueprint™dashboard or manage your money with the American Express® Business Checking Account.
Note that American Express products may have different features and capabilities from those that are discussed above in this article.
The material made available for you on this website is for informational purposes only and is not intended to provide legal, tax or financial advice. If you have questions, please consult your own professional legal, tax and financial advisors.
