business funding

Product and service related expenses are known as “direct costs.” Those that aren’t directly related to the creation of products and services are called “overhead costs” or “indirect costs.” This article will help you with overhead expense calculation and reliable and affordable business funding.

Overhead Expenses

Overhead includes three types of costs. The first one is called “fixed” overhead expenses, meaning the same amount that you pay each month for a service. The second one is called “variable” overhead costs. These are associated with fluctuating expenses.

Finally, the third one is known as “semi-variable” expenses. These are somewhere in between the first and the second expenses. For example, you pay a fixed monthly minimum for a certain service. However, you may be charged additional fluctuating fees for using extra features.

Overhead expenses include payment for:

  • Accounting services
  • Advertising and marketing
  • Insurance
  • Legal expenses
  • Office supplies
  • Property taxes
  • Rent
  • Salaries and wages
  • Travel
  • Utilities

Calculating Overhead Costs and Rate

When calculating overhead expenses, make sure to exclude direct expenses, such as costs related to product and material purchases used for resale, or direct labor. Here is the formula to use for calculating overhead costs:

(Monthly Overhead ÷ Monthly Sales) x 100 = Percentage of Overhead Costs to Sales

It’s critical to manage your finances wisely, including your overhead expenses, so you can move your business to the next level with success. Thankfully, there are reputable merchant service providers that can help you with your finances.

Any business might need access to business capital at some time. A trustworthy and experienced business funding provider will offer you fast and easy access to reliable and low cost financing solutions for your business.

Overhead costs have a direct impact on your balance sheet and income statement. More importantly, if you don’t know or incorrectly calculate your overhead expenses, you lose profit because of wrong product pricing.

Overhead Expenses 

Overhead expenses aren’t directly associated with a specific product or service and don’t directly generate profit. However, they are still included in your business expenses, and you should manage them properly. A reputable merchant services provider can help you get the best deal for your financial needs.

Author Bio: Michael Hollis is a Detroit native who has helped hundreds of business owners with their business funding solutions. He’s experimented with various occupations: computer programming, dog training, accounting… But his favorite is the one he’s now doing — providing business funding for hard-working business owners across the country.