In SaaS finance, accounting comes with its own set of challenges—especially in a subscription-based model. When G&A expenses are miscategorized, it becomes harder to identify cost-saving opportunities or protect revenue—particularly during periods of rapid growth when every dollar matters. As an entry on your financial statements, it doesn’t really give you enough information to effectively understand business spending behavior.
Your G&A rate reveals how efficiently you’re managing administrative costs relative to your overall business performance and helps identify optimization opportunities. In this article, we’ll explain what G&A expenses are and how they factor into your business’s income statement, and we’ll wrap up by sharing some strategies for managing them. Sikich practices in an alternative practice structure in accordance with the AICPA Professional Code of Conduct and applicable law, regulations, and professional standards.
G&A vs. Other Expense Categories
Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching. After almost a decade of experience in public accounting, he created MyAccountingCourse.com to help people learn accounting & finance, pass the CPA exam, and start their career. Download our FREE whitepaper, Use Financial Statements to Assess the Health of Your Business, to learn about the main financial statements and how to use them. By clicking “See Rippling,” you agree to the use of your data in accordance with Rippling’s Privacy Notice, including for marketing purposes. For example, purchasing a high-end projector might improve internal meetings or client presentations, but it doesn’t impact your software’s core functionality. Cutting costs is often seen as a synonym for cutting corners, but this doesn’t have to be the case.
What Are General and Administrative Expenses?
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Why G&A expenses matter
Calculating the G&A ratio (G&A Expenses / Revenue) helps track administrative cost efficiency over time. Examples include general liability insurance, which protects against claims of bodily injury or property damage, and commercial property insurance for office assets. Effective expense management can help overcome these challenges and improve overall efficiency. From expense tracking to invoice approvals, automation saves time and reduces human error. This means it’s important to effectively manage these expenses as it will make or break your profitability.
- Proper oversight helps prevent overspending on overhead costs and helps you make smart financial decisions to drive future growth.
- One key takeaway would be tracking expenses and keeping them under control to avoid cash flow problems.
- G&A expenses are a broad category of operational expenditure that can cover anything from rent and utilities to salaries to office furniture.
- However, you may choose to separate selling expenses from general and administrative expenses.
That’s where a clean, consistent approach to financial planning and analysis (FP&A) comes in. Efficient management of these expenses can significantly impact an organization’s profitability and sustainability. This article explores the key aspects of G&A expenses, focusing on their classification and implications for businesses. Understand the essentials of general and administrative expenses and their impact on financial management and strategic planning. Semi-variable expenses, on the other hand, are regularly occurring operating expenses that remain relatively stable but can fluctuate with usage.
For the least important expenses, see where you can slash or eliminate costs. Just because you’ve always paid a certain rate for office supplies, insurance, or even rent doesn’t mean you’re obliged to keep paying it forever. Circumstances change, and regularly reviewing your contracts with suppliers or vendors and renegotiating can go a long way toward keeping your overheads under control. To track performance over time, you can also calculate your G&A as a percentage of revenue (or operating expenses). G&A expenses are a broad category of operational expenditure that can cover anything from rent and utilities to salaries to office furniture. Schedule regular reviews (quarterly or monthly) to go over your company’s G&A expenses.
- Their policy document emphasizes that G&A represents costs for the management and administration of Berkeley Lab as a whole.
- With Alaan’s Corporate Cards, you gain complete control over employee spending.
- While most businesses require electricity to function, you can take actions to reduce your electricity bill.
- Overall, a thorough understanding of how G&A expenses differ from other types of expenses is vital for effective financial management and strategic planning.
How to calculate G&A costs
Businesses commonly use general and administrative expenses as a percentage of revenue to get an idea of how efficient the company’s overhead costs are. This metric also allows investors to compare their rates to other businesses and set targets to control general and administrative expense costs, primarily operating expenses and additional costs. G&A is listed in the income statement under operating expenses, distinct from production or sales-related costs for accurate financial analysis. Facilities expenses, such as rent and utilities, are prime examples of costs that can be proportionately shared between the two cost pools.
G&A expense FAQs
In fact, if you’re specifically looking to reduce costs across the organization, G&A expenses should be one of the first costs you evaluate. That’s because you can significantly reduce, if not entirely eliminate, some costs that fall into the G&A category without any negative impact on production or sales. General and administrative expenses represent direct and indirect costs resulting from day-to-day operations to wages employee salaries of a company. Such expenses may not be directly tied to the production of goods or services sold.
What salaries are included in G&A?
G&A also includes non-department-specific payroll, professional services like legal and accounting fees, travel, and license or permit costs. As your business scales, tracking G&A carefully is essential—because these expenses can have a growing impact on your bottom line. Tracking general and administrative expenses is essential for budgeting, cost management, and understanding a company’s financial health. Staff salaries form a large part of G&A expenses, encompassing compensation for non-revenue-generating employees such as administrative staff and management.
Businesses can identify where to reduce expenses or invest further by separating operational support costs from production-related expenses. This is especially crucial during economic downturns, where maintaining efficiency without compromising production becomes a priority. Be sure not to mix up G&A expenses with COGS or production costs, which can distort your financial statements and tax calculations. Many businesses also fail to properly document expenses or misclassify certain administrative costs as G&A, leading to inaccurate reporting and potentially lost tax deductions. General and administrative (G&A) expenses are a core operating expense on every company’s income statement. Understanding your G&A expenses can help you plan more accurate budgets, forecast future spending, and make more informed financial decisions.
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