How to budget for recurring expenses vs. non-recurring expenses

Creating and maintaining your budget can be like a game of chess. It involves strategy and adaptability, for when those unplanned expenses appear and you have to make unexpected moves. But there is also a consistency that comes from the game pieces you can always rely upon. In a budget these are your recurring expenses.

It’s important to stay on top of your recurring expenses, since, over time, they can just as easily take your budget off track as those unexpected one-off costs can.

In this article, we explain what recurring expenses are, compare them to non-recurring expenses, share tips for effective budget management, and provide guidance on expense management tools that help you track business costs.

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.

Properly managing your recurring expenses is crucial to properly managing your budget. When you plan for these more regular financial obligations, you can also ensure you have the funds, think about growth, and budget for the unplanned expenses that may pop up in a normal quarter or fiscal year.

Common examples of recurring expenses

These are 10 common examples of recurring costs:

• Rent or mortgage payments
• Utility bills
• Employee payroll expenses, including salary and wages
• SaaS subscription services
• Routine maintenance, upgrades, or repairs
• Taxes, including business and property
• Insurance premiums
• Professional services, like legal, consulting, or accounting fees
• Loan repayments
• Office supplies

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.

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

Common examples of non-recurring expenses

Here, is a list of 10 common non-recurring expenses:

• One-off equipment purchases
• Unexpected property improvements, renovations, or repairs
• Legal fees for litigation or settlements
• Fines or penalties
• One-time advertising or promotional campaigns, or events
• Costs associated with rebranding or restructuring
• Relocation expenses for an office move
• Insurance claims
• Investments in a new venture or project
• Costs related to disaster recovery or other emergency expenses

5 Steps for budgeting your recurring expenses

Budgeting for your recurring costs helps you create a roadmap for your future financial health. Follow these 5 steps to make sure that your recurring expenses are accounted for properly in your budget.

1. Identify and categorize recurring expenses

If you’d like to effectively budget for your recurring expenses, first you need to know what they are. Review your financial statements and records, including balance sheets, expense reports and receipts, and bank or credit card statements and make a list of all regular operating costs.

Remember to look for anything that is billed monthly, bimonthly, quarterly, or yearly, and be sure to also note the amount and frequency of each cost.

Once you have your list, you can start to organize things into categories. Use the list of examples above as your guide and start to categorize the recurring expenses into buckets like:

• Payroll and salary expenses
• Rent or mortgage
• Utilities
• Insurance premiums
• Subscriptions
• Maintenance costs

When you have your list of categories, you can analyze trends or patterns, and make informed decisions about your budget.

2. Cut redundant and unused expenses and subscription services

As you take a look at your list and categories, you may find unnecessary expenses. These costs can take a few different forms:

• 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

The next step in your budget review is to be judicious and start to cut out these unnecessary costs. Focus first on SaaS subscription management. Companies can lose hundreds or thousands of dollars to SaaS creep when IT spending isn’t centralized and controlled. And for a small business, it could be an easy way to find some gains toward rightsizing your budget.

3. Set realistic budget goals

Now that you have a better handle on your expenses and areas where you can make cuts, it’s time to set budget goats. Your goals will help guide your future budget planning, so it’s important that they are realistic and attainable.

This will help you understand better how your recurring expenses fit into your overall operating budget.

When making your goals, think about the past, present, and future. What does your historical data tell you about your costs? What is your current financial situation? And where do you see opportunities for growth down the line?

Document not only the goals, but how you will assess progress and success.

4. Automate the process for the future

Once you have a better handle on your expenses and understand your budget goals for the future, consider automation with a business expense tracker

You’ll save time by using expense management software that continually monitors your cash flow and delivers actionable insights. The right tool can:

• 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

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

5. Review and adjust regularly

While it’s always good to create a budget and stick to it, it doesn’t have to be a static document, Schedule regular times yearly, quarterly, or even monthly to review your budget and adjust to any changes your business faces.

Your recurring expenses should stay fairly stable, once you have a good handle on them. But a regular review allows you to take a look at non-recurring expenses and plan for any buffer needed in the future.

Effective budget management is a skill that takes time to cultivate. The more time you spend reflecting on the process and understanding how you can pivot when needed, the better your team will get at it, saving your business money in the process.

Tools for managing recurring expenses

Once you have a handle on your recurring expenses, what resources can help you manage your budget effectively for the future?

There are manual options, like spreadsheets. This gives you control over exactly how you want to track your budget. And if you’re not sure where to start, there are plenty of templates online. But if you have many recurring line items or a lot of categories to track, this can become unwieldy quickly.

Automated expense management tools can help with things like:

• Real-time spend reporting
• Custom approval workflows to provide visibility into significant purchases before they impact your account
• Effective vendor management to gather all your services into one dashboard and identify upcoming renewals, providing a clear view of all your active subscriptions
• Integrated employee credit cards that block transactions from certain vendors or categories
• Features to flag and prevent surprise charges from auto-renewed subscriptions or increased service prices

Of course, with the addition of any tool, there are costs associated and a learning curve for getting your team up to speed. But in the long-run, you’ll save time and money as your budgeting becomes more sophisticated and organized.

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.

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.

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