Every business needs things to maintain their day-to-day proceedings, from pens and paper to photocopiers and office maintenance costs. These items are essential to your business, but how do you classify these expenses in your business? That’s where listing office expenses and supplies are vital.
To aid you in this matter, we’ve created this simple guide to help you understand what qualifies as an office expense and an office supply.
Read on to learn the answers to these questions and more, along with a list of examples to help you draw the line between office expenses vs supplies.
Office Expenses vs Supplies In A Nutshell
Most people view office expenses and supplies as the same. However, there are subtle differences between the two terms:
Office expenses are necessary costs incurred to maintain and operate a business. They are also known as office operating expenses.
Office expenses consist of intangible services and some of the hardware required to run your business. These include rent, utilities, insurance, janitorial services, and payroll.
Other items included in office expenses are domain names, computer software, and website services. Desktop PCs, merchant fees, and employee cellphones are also part of office expenses.
According to the IRS, office supplies are common and essential tangible products you need to operate your business. They include paper, pens, notebooks, thumbtacks, paper clips, rubber bands, rulers, staplers, letterhead, writing utensils, binders, sticky notes, mailing supplies, and tab dividers.
Office supplies are your current assets, which means they are replenished regularly within a business year. But, you don’t need to stock up near the year’s end since you can only deduct the cost of office supplies you use in the current year.
How Are These Expenses and Supplies Settled?
Another main difference between office expenses and office supplies is who pays for them. There may be some overlap between the two. Generally, a team shares office expenses, and the business owner pays for them. On the other hand, office supplies are paid for by the office manager.
Office expenses are things that your business spends every month, such as the rent or mortgage, utilities, and insurance. Office expenses are ongoing costs you must pay regardless of how much or how little you use the office.
Supplies, however, are one-time purchases needed to keep the office running. You only need to purchase them when you need them.
The average price of office supplies for a 40-person workplace or medium-sized business is $1,069 per employee annually – a sizeable amount for starting businesses. Still, you can reduce it with proper planning.
Calculating Tax Deductions For Your Expenses
A few key differences between office expenses vs supplies are essential regarding taxes. Office expenses are typically tax-deductible. You can deduct some of these expenses from your taxes and save more on your office budget through depreciation.
Depreciation is a yearly income tax deduction that appears as expenses on the income statement. Small business owners can use depreciation to reduce the value of an asset over time due to age, wear and tear, or decay.
Office expenses are typically depreciated over a long time since they are a long-term investment. However, supplies are not tax deductible. This is because they are considered to be business expenses.
This is important to remember when considering whether or not to deduct your office expenses from your taxes. Businesses typically spend more on office expenses, so the difference in tax liabilities is significant.
Knowing the difference between these two types of expenses can help you better understand your business costs. You can also make more informed decisions about where to allocate your resources.
How to Save on Office Expenses vs Supplies
Businesses can save money when negotiating with vendors, looking for discounts, and purchasing secondhand equipment for their expenses and supplies. Let’s break down how we can cut our costs for both:
Office Expenses Budgeting
It also helps to be clever with your utility bills. You can enroll in cost-averaging equal payment programs to avoid unexpected rises. Moreover, it’s advantageous if you have a budget for all the office expenses.
To keep track of your office expenses and reduce costs, you must maintain accurate records of all expenses. This includes tracking both fixed and variable costs.
Fixed prices, such as rent or mortgage payments, do not change monthly. Variable costs, on the other hand, can fluctuate, such as utilities or supplies. You can use a simple spreadsheet to track your expenses, or many software programs can help you organize and track your spending.
The key is to be consistent in recording your costs and review your records regularly to identify areas where you may be able to save money.
Office Supplies Monitoring
Businesses can purchase bulk, shop for the best prices, and use generic brands to save on supplies. You must also use a business credit card; utilizing one with a cashback can help leverage the money you spend. If you are looking for the best and most affordable office supplies, check out LegalSupply.com.
Another way is to have a specific person responsible for ordering and keeping track of the supplies. This person can track what is used and what needs to be reordered. Another way is to have a system where each person who uses supplies is responsible for keeping track of their usage.
You can do this with a simple sign-out sheet. Tracking office supplies will be easier to reduce costs and keep the office stocked with the needed supplies.
Allocate Your Office Expenses and Supplies For Your Business
Like any business, the cost of running an office can vary greatly depending on the company’s size, type of business, and office location. Businesses can save money on office expenses by considering these factors.
Business owners can stay organized and avoid overlooking significant deductions by learning the fundamentals of business deduction categories, such as the distinction between office costs and supplies. Now that you know how office expenses vs supplies work, what to use and when it’s time to take action.
For more tips and tricks on turning your business into a successful one, keep checking back for new and exciting advice.