How to prevent recurring expenses from ruining your budget

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Staying on top of recurring expenses is crucial because, contrary to popular belief, they can erode your profits just as much as unexpected one-off expenses. A monthly expense audit can help you stay on top of these costs so they don’t spiral out of control over time. 

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In this article, we’ll define recurring expenses, compare them to non-recurring expenses, and share some tips for using expense management software to help you track business costs and create effective, accurate budgets.

What are recurring expenses?

Recurring expenses are the predictable, ongoing expenses required to operate your business. These regular operating expenses typically come due on a monthly, bimonthly, quarterly, or annual basis.

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Many small business owners assume their company’s financial ruin will come at the hands of a large, unforeseen expense. But regularly recurring expenditures can siphon away enough money to cause big problems for your business over the course of a normal quarter or fiscal year—which is why it’s so important to properly manage them.

Examples of recurring expenses

Some examples of recurring costs include:

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• Rent or mortgage payments
• Utility bills
• Payroll expenses, including salary and wages
• SaaS subscriptions
• Routine maintenance
• Property taxes
• Insurance premiums
• Ongoing marketing and advertising expenses
• Professional services, like legal or account fees
• Loan repayments

Recurring expenses vs. non-recurring expenses

Unlike recurring expenses, which are regular, predictable, and necessary for your business to function, non-recurring expenses are one-time or otherwise infrequent costs that are not regular or predictable in nature.

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Non-recurring expenses are often—but not always—unexpected or unplanned. And while they’re often regarded as a bad thing, it’s important to note that non-recurring expenses sometimes benefit your ongoing or future success, like a real estate investment or purchasing a patent or other IP.

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Whatever the reason for incurring them, it’s important to track and manage non-recurring expenses since they can significantly impact your financial health if you don’t properly account for them.

Examples of non-recurring expenses

‍Examples of non-recurring expenses include:

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• One-off equipment purchases
• Unexpected renovations or repairs
• Lawsuit settlements
• Fines or penalties
• One-time advertising or promotional events
• Costs associated with rebranding or restructuring
• Relocation expenses
• Insurance claims
• Investments in a new venture or project
• Costs related to disaster recovery or other emergency expenses

Why recurring expenses can be easy to ignore

Fixed expenses can sometimes go unnoticed due to inadequate expense tracking. Understanding how to budget for fixed expenses is critical since financial statements like a cash flow statement or balance sheet typically don’t go into enough detail to uncover these costs.

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‍Balance sheets, which list spending by business expense category rather than individual line item, allow recurring charges to blend in with other company essentials. When they fall under indirect costs or operating costs, it can be easy to assume paying them is just a regular part of running a business.

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Even if you’re able to keep up with your ongoing expense approval workflow, features like automatic renewal may allow month-to-month charges to slip under your radar with little to no scrutiny.

How to budget for recurring expenditures

1. Deploy expense management software with spending insights

Rather than wasting your time looking through the last accounting period’s receipts and comparing them to your company’s expenditure plan, save time by using expense management software that continually monitors your cash flow and delivers actionable insights.

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To uncover wasted spend, you need a business expense tracker that can surface the right information. It should be able to:

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• Automatically sort transactions based on merchant and category rules
• Track monthly spend and spend over time with any given vendor
• Search and filter expenses based on granular criteria
• Identify upcoming recurring payments
• Send notifications in real time so you don’t have to open a special app or dashboard to know what’s happening

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Once this data is clearly visible, it’s much easier to see where change is needed and create a strategy to handle it.

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2. Use pricing intelligence to pinpoint inflated bills and budgets

Finance software that crowdsources pricing intelligence can help you optimize your spending by identifying factors that often lead to wasted budget. Unfortunately, it’s all too common for companies to lose money because no one at the company knows what it “should” be spending.

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A Shopify analysis of 150 aspiring entrepreneurs and 300 small business owners found that the aspiring entrepreneurs expected to spend 12% of their budget on online fees, while established companies spent only 9% on the same expenses. If your budget is 3% higher than you need, you’re giving employees permission to purchase unnecessary tools or sign up for an overpriced plan rather than looking for ways to save.

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Sometimes spending starts at a reasonable level but increases yearly, so you end up budgeting for whatever the vendor is charging. The cost of switching from a service you’re fully integrated with is high, so you find yourself willing to pay more just to stay with it. Many companies eventually hire a procurement planning specialist to negotiate lower prices with longtime partners, but by that point, they’ve already spent more than they should.

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A finance platform with integrated pricing intelligence can flag when costs rise above the mean for a business like yours. When your system can negotiate prices based on industry-wide data, you get significant savings with minimal effort.

3. Limit unauthorized purchases with finance automation

You can use spend control software to create merchant and category rules by defining how the program classifies and controls purchases made with your corporate cards. This automated process enforces spending rules, preventing unexpected expenses and eliminating the need to constantly remind teams about what is and isn’t a valid work expense.

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Some features to look for include:

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• Integrated employee credit cards that block transactions from certain vendors or categories
• Spending limits to tailor employee cards for specific purchases or recurring stipends
• Custom approval workflows to provide visibility into significant purchases before they impact your account
• Features to flag and prevent surprise charges from auto-renewed subscriptions or increased service prices

4. Cut redundant and unused subscriptions

SaaS subscription management is essential in a world where nearly one in three employees have expensed a SaaS application. Companies can lose hundreds or thousands of dollars to SaaS creep when IT spending isn’t centralized and controlled.

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These unnecessary expenses can take a few forms:

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• Multiple subscriptions and/or accounts with the same service or vendor
• Different teams using similar (but not identical) solutions
• Old solutions that are no longer in service, either because the employee using them left or your team has moved on to different processes and workflows
• Services that cost more than they add in efficiency or productivity

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Effective vendor management tools can gather all your subscription services into one dashboard and identify upcoming renewals, providing a clear view of all your active subscriptions. This helps you determine whether you’re about to pay for something that’s not essential to your business operations.

Take control of recurring expenses with Ramp

Ramp’s modern finance platform gives you the visibility and control you need to manage your recurring expenses properly. We integrate with leading accounting solutions like QuickBooks and Sage Intacct to help you immediately identify unnecessary spending and take control of your business's cash flow.

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On top of that, Ramp Intelligence can give you proactive suggestions for where you can reduce costs. We’ve analyzed millions of business transactions to help you understand whether you’re paying too much for your software subscriptions, for example.

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Save money and get a complete picture of your financial data with Ramp.