Theadministrative expenses, in the business environment, are Expenditures that the company needs to function, but that are not related to the specific activity carried out by the company.
Therefore, the administrative expenses do not correspond to any of the economic costs that they do to the realization of the product that they end up offering, but rather to what is needed daily so that the company can function normally.
The operation that the company will have in the market will be economical to the extent that it is capable of providing a product whose market price exceeds the costs necessary to produce it. Sometimes that production will have a adding value, while in others it will be limited to the sale of the same thing that was bought: in all cases, there was one or more costs prior to having the finished product, which are recognized as operating costs.
The administration expenses, unlike the operative ones, they are the ones have no direct implication on the quality of the finished product.
This explains why most companies, in a vocation to always provide the best possible product, routinely choose to reduce administration costs before even considering reducing operating expenses. This, however, can have negative consequences since administration expenses are usually necessary and in the long run, a carelessness in them can have great implications.
In large companies, administrative expenses are managed by departments specifically prepared for that function. This happens because companies are perfectly aware that many of the essential issues for the normal operation of the company, such as human resources or communication between departments, is due to the correct execution of administrative expenses.
It is common for smaller companies, trusting in its potential to carry out the main activity above all, underestimate the importance of administrative expenses. When there is only one or a few owners, they often choose to make these payments, which later in the exercise of the company brings them a sum of complications as it becomes more tedious than it seems.
Below is a list of operating expenses, clarifying in some cases the particularities:
- Expenditures on staff salaries (in some cases they are considered operational, since they are costs of making the product).
- Office supplies.
- Phone bills.
- Expenses in salaries of secretaries.
- Rental of premises.
- Contributions for social security.
- Buying folders.
- General offices of the company.
- Corresponding expenses.
- Human resource costs (in case the company is not primarily dedicated to that).
- Salaries of senior executives.
- Purchase of office supplies.
- Business travel expenses.
- Water costs.
- Purchase of folios.
- Electricity expenses.
- The company's legal advice fees.
- Reams of sheets for printing (in case it is not a printing press or something similar).
- The fees for the accounting service for the company.
- Advertising expenses (some consider it to be intrinsic to the product, but it is administrative expenses).
