Expenses that a Small Business Can Afford

A key difference between a massive, established business and a small business startup is that, when the big business loses money, it doesn't suffer as hard as a small business can. One bad expense can plunge any entrepreneur into severe debt and bankruptcy.

It's essential for a small business owner to know what they can afford to spend and how to adjust their budget as time goes on. Here are some categories where a small business can afford to pay without hurting their chances of success.

Cost of Goods Sold: If you sell on behalf of another producer, you can deduct the cost of the purchase you made from your product supplier, along with costs related to shipping products to your business.

Mortgage: Property tax is common for any business owners, but there are benefits to owning the mortgage on your property rather than leasing the space. Not only will you have a higher deduction, but you also have the opportunity to use that space as you see fit.

Labor: Anything directly related to labor coverage—including employee wages and salaries, bonuses, and commissions—can be written off. The same rule applies for employee health coverage, insurance plans, and retirement pensions, which will go a long way to sustaining your overall workforce.

Advertising: While it may take up less on your budget than product quality assurance and labor practices, a small amount of advertising can do wonders for a small business. This is especially true if you're consistent about where you advertise, such as through classified ads or search engine marketing.

Postage and Shipping: Getting products to their clients on time is crucial for many businesses, which is why small business owners can deduct the cost of postage and overnight deliveries.

Office Supplies: If it's essential to your business's daily operations, then it's deductible. Supplies can be as basic as paper clips and manila folders to as large and complex as computers, printers, and paper shredders.

Utilities: Phone and Internet expenses may seem like the most obvious claim on a small business (being how they reach their clients), but there are other areas to consider like electricity, gas, sewage, and garbage pickup.

Travel and Entertainment: The IRS usually looks into these claims closely on account of how easy it would be to abuse them. Nonetheless, you can write off mileage and gas costs when you're traveling for business purposes, as well as the receipts for meals you buy while entertaining special clients.

Image by Angela Radulescu on Flickr

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