What Are Discretionary Expenses for My Business?
A dedicated financial professional with more than three decades of executive-level experience, William Mark Heiden has a track record of growing businesses and boosting returns on client portfolios. Over the course of his career, William Mark Heiden has become skilled at such things as cost-cutting initiatives and the financial turnaround of companies.
When cutting business costs, a common technique is eliminating or reducing, discretionary spending. This type of spending refers to any expense that is not directly tied to a company’s operations. Since this type of spending is not tied to business operations, ending it should not stop or disrupt business operations in the short term.
Recognizing these costs is often challenging, since they are often associated with “wants.” In business, for example, a brick-and-mortar retail store may want an Internet connection, but the store may still be able to run without Internet for a short period of time. This would make Internet a discretionary expense for the business. However, an online-based company needs an Internet connection to operate, so getting rid of it would cause a direct disruption to operations.
Usually, discretionary expenses are paid for with discretionary income. This is income that is left over after a business pays its taxes and other essential expenses, such as rent or utilities. Unfortunately, businesses that are struggling financially often lack the discretionary income they need to cover such expenses. For this reason, managers should keep track of all discretionary expenses so they can more easily see what expenses can be cut during periods of financial turmoil.
When cutting business costs, a common technique is eliminating or reducing, discretionary spending. This type of spending refers to any expense that is not directly tied to a company’s operations. Since this type of spending is not tied to business operations, ending it should not stop or disrupt business operations in the short term.
Recognizing these costs is often challenging, since they are often associated with “wants.” In business, for example, a brick-and-mortar retail store may want an Internet connection, but the store may still be able to run without Internet for a short period of time. This would make Internet a discretionary expense for the business. However, an online-based company needs an Internet connection to operate, so getting rid of it would cause a direct disruption to operations.
Usually, discretionary expenses are paid for with discretionary income. This is income that is left over after a business pays its taxes and other essential expenses, such as rent or utilities. Unfortunately, businesses that are struggling financially often lack the discretionary income they need to cover such expenses. For this reason, managers should keep track of all discretionary expenses so they can more easily see what expenses can be cut during periods of financial turmoil.
