How to Get a List of Your Operating Expenses

Understanding your business’s financial health begins with a clear grasp of its operating expenses. These are the costs a business incurs as part of its normal, day-to-day activities, separate from the direct costs of producing goods or services. Accurately identifying and tracking these expenses is fundamental for effective financial management. This provides insights into profitability and operational efficiency, allowing business owners to make informed decisions about spending and resource allocation, and is a foundational element in maintaining sound financial control.

Defining Operating Expenses

Operating expenses represent the costs involved in running a business’s core operations on an ongoing basis. These outlays are necessary to keep the business functioning and generating revenue, yet they are not directly tied to the production of a specific good or service. Common examples include the rent paid for office space, utility bills for electricity and internet, and the salaries of administrative or sales personnel. Insurance premiums, marketing and advertising costs, and professional fees for services like legal or accounting advice also fall into this category.

These expenses are considered “operating” because they support the general function and administration of the business rather than directly contributing to the creation of products. For instance, the wages of a factory worker directly involved in manufacturing would be classified differently than the salary of an office manager. Operating expenses differ from the Cost of Goods Sold (COGS), which encompasses the direct costs of producing items sold, such as raw materials and direct labor. They also stand apart from capital expenditures, which involve investments in long-term assets like buildings or machinery that provide value over many years.

Locating Expense Information

Gathering data for your operating expenses involves reviewing various financial documents. Your business bank statements are a primary source, detailing withdrawals, electronic transfers, and checks used for operational purposes. Business credit card statements provide a record of purchases. For both, scrutinize each transaction to identify the vendor, date, and precise monetary value, confirming its business relevance.

Invoices and receipts serve as fundamental source documents for individual expenses. Retain physical or digital copies and extract key information: vendor name, transaction date, description of goods or services, and total amount paid.

Payroll records detail salary, wage expenses, and employer contributions for taxes and benefits. Utility bills document costs for electricity, water, gas, and internet. Loan statements delineate the interest portion of business loan payments, which is an operating expense. Online accounts for subscriptions, software, or digital advertising often contain transaction histories.

Recording and Categorizing Expenses

Once you have located and extracted the necessary expense data from your source documents, the next step involves systematically recording and organizing this information. Businesses commonly choose from several methods for this process, including simple spreadsheets, dedicated accounting software, or specialized mobile applications. Spreadsheets offer flexibility and are suitable for businesses with fewer transactions, allowing for manual entry and customized organization. Accounting software, such as widely used platforms, automates much of the data entry, facilitates reconciliation, and can generate comprehensive financial reports. These software solutions often integrate directly with bank accounts, streamlining the import of transactions.

The recording process involves entering specific details for each expense into your chosen system. For every transaction, input the exact date the expense was incurred, the name of the vendor or payee, and the precise monetary amount. Additionally, include a clear and concise description of what the expense was for, such as “July office rent” or “marketing campaign materials.” Categorizing expenses is crucial, assigning each to an appropriate account for financial analysis, budgeting, and tax preparation. Common expense categories include:
Rent Expense
Utilities Expense
Salaries and Wages Expense
Office Supplies
Marketing Expense
Professional Fees

A “chart of accounts” provides a structured list of these categories, ensuring consistency. Regularly recording expenses, whether daily, weekly, or monthly, helps maintain accuracy, prevents backlogs, and ensures you have up-to-date financial insights.