Expenses are one of the fundamental aspects that affect the success of business enterprises, they reflect the volume of revenues and their impact on the company's balance sheet, require effective management and careful planning to achieve the desired profits and minimize costs. Through this article, we will talk about expenses in commercial companies, and review the importance of identifying the necessary expenses and analyzing them accurately, in order to ensure the achievement of the desired goals and improve the financial performance of the company. In this article, we will discuss the types of expenses that commercial companies face and how to control and manage them effectively, and we will also provide some tips and guidelines to achieve better control of expenses and achieve expected profits.
Expenses are one of the important things that you need to understand well in commercial companies, as these expenses constitute a cost to the company and significantly affect its performance and profitability. Thus, knowing the types of expenses and how to identify and manage them effectively is vital for the success of the company.Expenses are one of the important things that you need to understand well in commercial companies, as these expenses constitute a cost to the company and significantly affect its performance and profitability. Thus, knowing the types of expenses and how to identify and manage them effectively is vital for the success of the company.
What are the expenses?
Expenses are defined as the costs that a person or company incurs in achieving its various goals and activities. Expenses can be classified into several types, and we will talk about them.
Types of expenses
General expenses: these include expenses that cannot be linked to a specific activity, such as employee salaries, electricity costs, rents, insurances and taxes.
Administrative expenses: include expenses that result from management and supervision processes, such as administrative wages, bonuses, training and development costs.
Operating expenses: these include expenses that result from the operating activity of the company, such as production costs, manufacturing, distribution of products and services, transportation and storage costs.
Capital expenses: these include expenses that result from the purchase or construction of fixed property, such as fixed assets, equipment, buildings and land.
Accounting expenses vary depending on the type of company, its size and business activity. These expenses are recorded in the accounting accounts of the company and are used in the preparation of various financial reports reflecting the company's performance.
What are the other types of expenses in commercial companies?
The expenses incurred by commercial companies are very diverse, they vary depending on the type of company and its activity. The most important types of expenses in commercial companies are:
Production expenses: these expenses include the costs of purchasing raw materials and supplies necessary for production, as well as labor and operating costs. Selling and marketing expenses: these expenses include marketing costs, advertising, promotions, discounts and commissions for intermediaries and representatives. Management expenses: these expenses include the costs of salaries and wages for employees and managers, electricity, water, telephone, rent, social and health insurance costs. Debt and interest expenses: these expenses include interest accrued on debts and loans obtained by the company. Tax expenses: these expenses include taxes payable on profits, sales and salaries. Maintenance and repair costs: these expenses include the costs of maintenance and repair of equipment and machinery.
There are many other expenses that can arise in commercial companies depending on the type of activity carried out by the company.
How to manage expenses in commercial companies?
Effective expense management is one of the most important factors affecting the success of a company. To achieve this, the company must follow the following procedures:
Accurately identify expenses and classify them by type, in order to determine the budget allocated for each type of them.
Prioritization of expenses, where priority should be given to expenses that enhance the company's activity and achieve its basic goals.
Control excess expenses that do not contribute to achieving the goals, by reviewing the budget and looking for ways to reduce costs.
Effectively manage inventory and determine the appropriate levels of inventory, in order to avoid waste and excess transportation and storage costs.
Employing modern technologies and smart solutions in expense management, such as accounting programs and Human Resources Management Systems.
Types of revenue expenses
Revenue expenses include revenues that the company receives through its own business operations, among their types are:
Sales: it is the revenue that the company receives from the sale of its products or services to customers.
Additional revenue: includes the profits that the company receives from the additional services it provides to customers, such as maintenance, training and technical support.
Additional revenue: it includes the profits that the company receives from the sale of products related to its main products, such as accessories and accessories.
Special income: includes the income that the company receives from the special operations that it carries out, such as the sale of real estate or stocks.
Special income: includes the income that the company receives from the special operations that it carries out, such as the sale of real estate or stocks.
Example: if a company sells its products for EGP 100 per unit and 1000 units have been sold within one month, the revenue received will be EGP 100000 The company can also generate additional revenue from the additional services it provides to customers, such as maintenance and technical support.
Types of capital expenses
Capital expenses include expenses that relate to the company's capital assets, among their types are:
1 - purchase of fixed assets: includes physical assets that the company needs for business operations, such as machinery, equipment and real estate.
2-constructions and improvements: the costs include the construction of buildings, installations and other improvements to improve the infrastructure.
3. Investment in research and development: includes the costs spent on research and development to develop new products and services.
4-investing in the brand: includes the costs spent on marketing, developing the brand and increasing its value.
Example:
If the company has invested 150,000 pounds in the purchase of a new machine to improve productivity, then this amount is considered a capital expense. The company can also spend more money on improving the company's infrastructure or invest in research and development to improve the products offered.
What is the difference between income and expenses?
Revenues are the amounts that enterprises and individuals earn from their business or production activities, while expenses are the amounts that are disbursed to cover the costs of the daily operations of those enterprises and individuals. Simply put, the difference between income and expenses can be considered as the profits or losses of an enterprise or an individual for that specific period of time. If the revenue is greater than the expense, then the enterprise or individual has made a profit, and if the expense is greater than the revenue, then there will be a loss.
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