How to budget for your company’s recurring expenses

Recurring expenses are the regular, predictable costs that keep your business running smoothly. These are the financial commitments you can set your watch by — they occur consistently and at fixed intervals, whether weekly, monthly, quarterly, or annually. Think of them as your business’s overhead.

Understanding these expenses is key to forecasting your cash flow accurately. When you have a clear picture of recurring costs, you can ensure you have enough funds to meet your obligations without unpleasant surprises. Such foresight allows you to avoid cash crunches, plan for growth, and make informed decisions about resource allocation. Essentially, a solid grasp of your recurring expenses will make them more manageable and help you push your business strategy forward.

10 most common examples of recurring expenses for businesses

1. Rent or mortgage payments: Costs associated with leasing or owning business property.
2. Utilities: Electricity, gas, water, and internet services that keep your operations running.
3. Employee salaries and wages: Paychecks, benefits, and payroll taxes.
4. Insurance premiums: Protecting your business with property, liability, and workers' compensation coverage.
5. Loan payments: Regular installments on business loans or other debts.
6. Software subscriptions: Fees for essential tools like accounting software, CRM systems, chat and video communications tools, or project management platforms.
7. Office supplies: The everyday items that keep your workspace functional, from coffee to paper to printer ink.
8. Routine maintenance and repairs: Regular upkeep of your equipment, facilities, and vehicles.
9. Professional services: Ongoing fees for legal, accounting, or consulting expertise.
10. Taxes: Various business taxes, including income, property, and sales taxes.

While recurring expenses are the predictable, regular costs that keep your business ticking, non-recurring expenses are the wildcards that can shake things up. These one-off costs often come with little warning and will vary in amount.

At home, these would be expenses related to your refrigerator zonking out or perhaps a tree-trimming service. Non-recurring business expenses might include unexpected repairs on equipment, legal fees for a lawsuit, or the cost of a major software upgrade. They're the financial equivalent of pop quizzes — you know they'll happen eventually, but you can't always predict when or how much they'll set you back.

The key difference between the two is predictability. Recurring expenses are like the steady drumbeat of your business finances — regular, rhythmic, and easy to plan for. Non-recurring expenses, on the other hand, are more like cymbal crashes — attention-grabbing and potentially disruptive if you're not prepared.

To maintain a healthy financial position, you’ll want to understand both types. While you can budget pretty precisely for recurring expenses, it's wise to have a contingency fund for those non-recurring surprises that inevitably crop up.

10 most common examples of non-recurring expenses for businesses

1. New equipment: Purchasing or leasing new machinery, tools, or equipment for business operations.
2. Property improvements: Renovations, expansions, or upgrades to existing business property.
3. Rebranding campaigns: Costs associated with changing a company's brand identity or image.
4. Litigation costs: Expenses related to legal disputes or lawsuits.
5. Intellectual property: Costs associated with obtaining or defending patents, trademarks, or copyrights.
6. Product launches: Expenses related to launching and marketing new products, including advertising, promotions, and event costs.
7. Acquisitions and mergers: Costs related to merging or acquiring other businesses.
8. New locations: Costs of opening new business locations, including leasehold improvements and equipment.
9. Legal settlements: Payments made to settle lawsuits or legal disputes.
10. Tax audits: Costs associated with defending a tax audit or making adjustments to tax filings.

Budgeting for recurring expenses is the first step in creating a financial roadmap for your business. This exercise helps you navigate the regular costs that keep your operations running smoothly, preventing unwelcome surprises that can derail your cash flow. By accurately planning for predictable expenses, you're less likely to miss payments, bounce checks, or face some other potentially damaging consequence.

Moreover, a clear picture of your recurring costs helps you make smarter financial decisions. When you know exactly how much you're spending on regular expenses, you can confidently assess whether you have the resources to invest in new equipment, hire additional staff, or expand your marketing efforts — ie, service the non-recurring expenses.

Effective budgeting for recurring expenses also allows you to allocate resources more efficiently. You can identify areas where you’re overspending and redirect those funds to projects with a better ROI. This helps you prioritize your spending, ensuring that every dollar works hard for your business's growth and success. Budgeting for recurring expenses, then, isn't just about avoiding problems — it's about creating opportunities for strategic financial management.

Step 1: Identify your recurring expenses

The first step in effectively budgeting for recurring expenses is to figure out all that you're spending right now. Begin by meticulously reviewing your financial records, including bank statements, credit card bills, and accounting software reports. Your objective is to pinpoint all regular, predictable costs on the books.

Key categories to focus on include:

• Rent or mortgage payments for the business
• Payroll expenses, including salaries, wages, and related taxes
• Utility costs for electricity, water, gas, internet, and phone services
• Insurance premiums (property, liability, workers' compensation)
• SaaS subscriptions and technology services
• Marketing and advertising expenses
• Loan repayments and debt obligations
• Office supplies and maintenance costs

It's important to document both the frequency and amount of each expense. Pay particular attention to quarterly or annual expenses that might be overlooked in a monthly review. These could include property taxes, annual subscriptions, or periodic maintenance contracts. It could be a painstaking process, but thoroughness at this stage lays the foundation for accurate budgeting and planning.

Step 2: Organize and categorize your expenses

Organizing and categorizing your expenses is like creating a financial filing system for your business. This step is essential for gaining a clear understanding of where your money is going and how different costs relate to one another. Consider using a spreadsheet or spend management software to sort your expenses into the appropriate categories.

These categories might include operations, personnel, marketing and sales, technology, professional services, and debt servicing. Categorizing your expenses will help you quickly see which areas of your business are costing the most and where you might have more leverage to reduce or reallocate resources.

You’ll be able to better analyze your spending patterns more effectively and make informed decisions about your financial priorities. This process essentially transforms raw financial data into actionable insights, helping you spot trends and make strategic decisions about your business's financial future.

Step 3: Review historical data

To truly know where you want to go, it’s important to know where you’ve been. Examining past expenses can surface valuable insights about your spending patterns and financial health. Start by gathering your bank statements, credit card bills, and financial reports from the past 12 months. Look for trends such as months with consistently higher or lower expenses, gradual increases in certain cost categories, and sudden spikes in spending and their causes.

This historical context can help you identify areas where cost creep has happened, or where you've successfully reduced expenses. For instance, you might notice that your marketing costs have increased without a corresponding rise in sales, signaling a need to reassess your marketing channels or overall strategy.

This analysis can help you forecast future expenses more accurately, allocate funds more effectively, and potentially identify areas for cost-cutting or reinvestment. It's not just about looking back; it's about using past data to inform future decisions and improve your financial posture.

Step 4: Account for seasonal variations

Just as nature has its seasons, so does your business. Seasonal variations can impact recurring expenses in a lot of companies, and failing to account for them can throw your budget off balance. For example, a retail business might see higher utility costs during the summer due to increased air conditioning use, while an accounting firm might have higher staffing costs during the busy tax season.

Knowing these patterns will help you budget for these fluctuations accurately. To account for seasonal variations, identify your high and low seasons, analyze how different expense categories change during these periods, and create a budget that allows for these shifts. While these seasons are “predictable,” the amount can vary, so be sure to build flexibility into your budget.

This proactive approach to seasonality helps you avoid cash flow crunches during slower periods and capitalize on your busiest times, contributing to a more resilient and adaptable business model.

Step 5: Set realistic budget goals

Knowing all this information about your recurring expenses, what kinds of budget goals can you set? Examples might include reducing overall recurring expenses by a certain percentage to improve your operating budget's bottom line, cutting software subscription costs, or increasing the marketing budget allocation without raising the total operating expenses. These goals should provide direction on how to manage your recurring expenses effectively but still align with your overall operating budget.

When setting these goals, it's important to be realistic. Consider your current financial situation, your business's growth trajectory, and any upcoming changes that might impact your expenses. A goal that's too ambitious might lead to frustration, while one that's too easy won't drive meaningful change.

The most effective goals are specific, measurable, achievable, relevant, and time-bound, so be sure to document how you’ll assess each of those components. They’ll become your financial North Star, guiding your decisions and helping you measure progress over time.

Step 6: Use budgeting and expense management tools

How do you make this recurring expense work less work? Consider adopting software to streamline your financial tracking, giving you more time to focus on growing your business.

To choose the right software for your business, consider factors like ease of use, scalability, customer support, and cost-effectiveness. Look for an intuitive interface that your team can quickly adopt, ensure the software can grow with your business, check for responsive customer service to help you navigate any issues, and weigh the software's price against the time and money it can save you.

Brex offers modern budgeting and expense management tools designed for businesses of all stages and sizes. Brex can help with automated expense reporting, real-time updates, custom budgets, detailed reporting, and integration capabilities. By leveraging powerful platforms like Brex, you can take the guesswork out of budgeting and gain greater control over your recurring expenses. You’ll not only save time but also gain deeper insights into your financial patterns, helping you make more informed decisions about your business's future.

Step 7: Review and adjust your budget regularly

Prices will almost never stay the same year over year, so don’t think of your budget as a set-it-and-forget-it tool. It's a living document that needs regular attention and adjustment to remain effective. Review your budget monthly or quarterly, and use this time to specifically look for expenses that consistently exceed or fall short of budgeted amounts. You might find new recurring expenses that need to be incorporated or expenses that are no longer relevant.

Commit to making adjustments based on these findings. Maybe you need to allocate more funds to a growing expense category, or perhaps you've found an opportunity to reduce costs in another department. Remember, the goal is to keep your budget aligned with your business's current reality and future goals.

Regular reviews and adjustments are the only way to ensure your budget remains a relevant financial management tool. You’ll find you have more agility in your business finances, allowing you to respond quickly to changes in your business environment.

Step 8: Communicate with stakeholders

Open communication about your budget is key to its success, especially if you're not the only one making financial decisions for your business. This communication should include discussions about your company's expense policy. Ensure that all stakeholders understand how this policy applies to recurring expenses and how it shapes your decisions. Keeping everyone in the loop — your business partners, department heads, and key team members — ensures buy-in, reduces pushback, and improves compliance. Schedule regular meetings to discuss the budget, its performance, and any necessary adjustments.

One pro move is to encourage input from your team. They might have insights into ways to reduce costs or improve efficiency in their areas of responsibility. By fostering a culture of financial transparency and shared responsibility, you’ll also create a more robust and effective budgeting process for your recurring expenses.

When everyone understands and contributes to the budgeting process, you're more likely to achieve your financial goals.

Step 9: Explore cost-cutting opportunities

Even with a well-planned budget, there's often room to trim expenses and improve your bottom line. One strategy to reduce recurring expenses is negotiating contracts with vendors. Whether it's for cloud services, software subscriptions, or professional services, don't be afraid to revisit terms and pricing. Many vendors are open to negotiations, especially if it means long-term contracts or bulk purchases. By securing better deals, you can potentially reduce your recurring expenses without sacrificing quality or service.

Even smaller adjustments like using LED bulbs or programmable thermostats can reduce utility costs. Remote work options can also potentially reduce your space requirements and associated costs. Also, look into bundling services, as you might get a better deal by combining services like internet and phone from a single provider. Platforms like Zoom, for instance, offer video, chat, and VoIP phone solutions and could substantially reduce the number of collaboration tools you need.

Additionally, be mindful of your spending habits and encourage your team to think twice before making purchases and to always look for the most cost-effective solutions that won’t impact service. These small changes can add up to big savings over time, freeing up resources for growth and innovation in your business.

Step 10: Document and reflect on your budgeting process

Keeping a record of your budgeting journey is like creating a financial diary for your business, which can be invaluable for future planning and decision-making. Write down the strategies that worked well and those that didn't, and record any unexpected challenges you faced and how you overcame them. This info will be a goldmine when you're planning future budgets or looking to make some strategic business moves down the road.

To really dig in and get some clarity, ask yourself questions like: What have we learned about our spending patterns? How has our budgeting improved our financial health? What new strategies could we try in the next budgeting cycle?

By documenting and reflecting on your budgeting process, you're not just managing your current finances. You're building a roadmap for long-term financial success. This reflection helps you continuously improve your budgeting skills, learn from past experiences, and make more informed financial decisions.

So how do you effectively manage these recurring expenses? Businesses have a range of options at their disposal, but you’ll find some are a little old-school and outdated. Traditional manual methods, such as spreadsheets and calendars, have long been staples for financial tracking. These tools offer complete control over the process and can be tailored to specific needs. They're pretty cost-effective and typically don’t require any additional software licensing. However, manual tracking comes with its own set of challenges. It's time-consuming and prone to human error, which can lead to inaccuracies in financial reporting. Additionally, as your business grows, manual methods may struggle to keep pace with increasing complexity.

On the other hand, automated expense and budget management tools offer a more sophisticated approach. Brex stands out in this arena, providing a comprehensive solution that streamlines expense tracking, categorization, and analysis. With Brex, you can automate the categorization of expenses, set custom budgets, and generate detailed reports with ease. Real-time updates allow for immediate insights into your financial status, enabling quicker decision-making. One satisfied Brex customer, Signifyd’s accounting manager Ty Barton, said, "Brex budgets keep everyone accountable while giving us real-time visibility into all spend."

Automated solutions like Brex also offer features that manual methods simply can't. These include integration with popular accounting software, automated receipt capture, and customizable approval workflows. These advanced capabilities help businesses not only save time but also gain a more accurate and comprehensive view of their financial health. While there may be a learning curve, the long-term benefits of automated solutions often far outweigh these temporary hurdles.

1. Stay informed about changes

Think of yourself as a financial weather forecaster. By staying informed about changes in your business climate, you can predict and prepare for any financial storms on the horizon. Keeping a close eye on changes in your business environment is core to accurate budgeting. For example, you might encourage your procurement team to stay vigilant about shifts in supplier pricing or terms and create the space for team members to share any updates. You might set quarterly or biannual meetings. These proactive measures allow you to anticipate and adapt to cost fluctuations before they impact your bottom line.

Industry trends and developments can also influence your recurring expenses. For instance, technological advancements might require new equipment or software. AI is making huge waves in a lot of areas and will likely continue to disrupt a lot of business plans. Similarly, changes in customer preferences could require adjustments to your marketing and advertising strategies. By staying informed, you can make timely adjustments to your budget and maintain financial stability.

2. Build a contingency fund

It’s not always a priority for early-stage companies, but creating a contingency fund can be your financial safety net and help you navigate unexpected expenses without derailing your budget. Aim to build a fund that covers 3-6 months of recurring expenses, providing a comfortable buffer against unforeseen circumstances.

To build this fund, consider implementing strategies such as setting up automatic transfers from your main operating account. This "pay yourself first" approach ensures regular contributions to your contingency fund. Additionally, set aside time to review your expenses to identify areas where you can cut back. Even small savings can accumulate over time, strengthening your financial resilience.

3. Reduce waste and inefficiency

Inefficiency is a business killer, so you’ll want to regularly assess your operations to identify areas where people, time, and cash are being used inefficiently. This could involve optimizing processes, conserving energy, or minimizing material waste. Tools like Brex can be invaluable here, helping to streamline financial processes and give more time and money back to your employees and the business as a whole.

Don't overlook the importance of regular maintenance. It's often more cost-effective to maintain equipment and systems than to repair or replace them when they break down. Investing in preventive maintenance can help you avoid costly surprises and keep your recurring expenses more predictable. Remember, efficiency isn't just about cutting costs. It's about maximizing the value you get from every dollar spent.

“The transparency that Brex provides our team is unparalleled. Our finance partners are ecstatic to be able to see how spend is trending at any point in time. We donʼt get that with legacy systems." — Jerome Barley, Head of Global Travel & Expense, DoorDash

As we wrap up our expedition through the landscape of recurring expenses, it's clear that these costs can play a role in how fast or slow your business grows. By mapping and navigating these expenses effectively, you're not just staying on course, you're charting a path to new heights of success.

But keeping track of this ever-changing financial topography can feel like orienteering blindfolded. That's where Brex can be your financial GPS. With Brex's corporate card and budget management software, you can transform the wilderness of recurring expenses into a well-marked trail.

Imagine having a birds-eye view of your spending, automated expense tracking, and custom budget boundaries all in one place. No more getting lost in the weeds of receipts or stumbling over unexpected costs. Brex's tools provide the map and compass, so you can focus on the horizon, expanding your business and reaching new peaks.

Ready to elevate your financial strategy? Sign up for Brex today. With Brex as your guide, you're not just traversing the financial landscape — you're conquering it.