Business Overhead Costs
What it is and why it’s important to small business owners.
Definition
Overhead Costs are the indirect costs or fixed expenses of operating a business that range from rent to administrative costs to marketing costs. Overhead refers to the sum of all non-labor expenses required to operate a business.
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How it is Used
Efficiently managing expenses is critical for a successful business, and Overhead Costs play a pivotal role in realizing favorable profit margins. The better a company is able to manage Overhead Costs, the more competitive they are able to be in the industry overall.
Ways to Improve Overhead Costs
An easy way for a business to decrease Overhead Costs is to go paperless. This would help save on printers, ink/toner, paper and storage space. A business could also cut costs by looking for ways to be more energy efficient. For example, switching to LED lights with motion sensors would help reduce electrical costs.
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