Knowing and Controlling Your Period Costs

Business Period Costs

Period costs are those expenses, not related to the production of units or delivery of services, which every company incurs to run its business. These costs are typically monthly recurring expenses and relatively stable whether your sales increase or decrease.

Typical Period Costs

• Advertising and promotion—media advertising, direct mail campaigns, e-mail campaigns, event marketing
• Automobile expense (not used for delivery or pick up of products)
• Salaries—office staff
• Employee benefits—the company’s portion of Social Security and Medicare, health benefits, 401K contributions of administrative, sales, and support employees
• Insurance—general liability, fire and theft, officers and directors liability
• Interest on loans and other liabilities
• Legal and professional fees—accountants, lawyers, consultants, and other professionals that provide services to the business
• Office expense—stationery and supplies
• Repairs and maintenance—expenses related to the upkeep of office space
• Travel, meals, and entertainment—deductible expenses related to the growth of the business and conferences and seminars for employees to enhance performance.
• Utilities—electricity, water, and other services

How controlling period costs can improve your business performance

As mentioned, these expenses are relatively stable. Your rent, salaries, fringe benefits, insurance, etc. are constant each month. Much of your focus is on growing your business and controlling your direct costs but your period expenses can be an area providing significant savings.

Do you shop for your insurance coverage every year? Rates change yearly and should be shopped the same way you seek the best prices for your raw materials and distribution services.

Do you review your employee benefits programs regularly? The administrative costs can grow very quickly and should be reviewed with benefits professionals annually.

Are you using up-to-date equipment, computers, and software? You may gain important savings by installing state-of-the-art computers and software. Increased productivity by your office staff can provide you with better and faster information to make more timely decisions as well as requiring fewer people to do the same or more work.

Procrastination and inertia are your worst enemies. You should schedule regular meetings with staff and professionals to seek ways to better manage the company and reduce costs. You might be surprised by the knowledge and concern your staff brings to the table to help make the business more successful.

Author: Marc J Marin