What is a General and Administrative Expense budget?
When you set up your General and Administrative Expense budget, you should use your expense documents from the previous period to budget for the current period. You also use the current economic climate and inflation rate to see the impact on the general expenses of your business.
For this you also have to use your expense documents from the previous period to budget for the current period.
To determine the General and Administrative Expense budget for the next period, keep all your expense documents of the current period in a safe place. Use these documents as a starting point to budget for the next period.
You also need to properly manage the operating expenses and keep in mind that there are two categories of expenses that make up operating expenses. These are selling expenses and general and administrative expenses.
Selling Expenses + General and Administrative Expenses = Operating expenses.
You incur operating expenses for normal business activities to generate revenue. To classify your operating expenses, keep track of the amount of the selling expenses and general and administrative expenses. It's vital to create your General and Administrative Expense budget so you can keep track of these..
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This example shows just how important your General and Administrative Expense budget really is
Sachin and Imran own a company called The Cricket Machine. It does the following:
1. Manufactures cricket bats; and
2. Manufactures cricket helmets.
They own a small warehouse and employ 11 workers who manufacture cricket bats daily. They also manufacture helmets for three provincial cricket sides around the country. Sachin and Imran want to supply all provincial cricket teams in South Africa with their products.
To get these contracts, they need to travel around the country to promote them. So for Sachin and Imran, the advertising, rent, office supplies, wages, travel and accounting fees are all operating expenses to manufacture and sell the cricket bats and helmets.
When Sachin and Imran make cricket bats and helmets, it's pretty easy to keep track of the expenses associated to each product because they are basic manufacturing expenses. But it's very difficult to track general and administrative expenses for the whole business because they are not part of manufacturing.
Sachin and Imran will track expenses that form part of the daily operations of their business to help them budget for the next period. They do this by keeping all supporting documents like invoices and statements for expenses being paid in the current month.
We hope the information above together with the example we provided will offer you useful notes on keeping track of your expenses!