How to plan and budget for periodic expenses

An accurate budget is a critical part of running a successful business. After all, your budget helps you understand your cash flow, and even the simple act of creating a budget can help you identify areas you can cut back and save.

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With that said, creating an accurate budget is often easier said than done. Sure, it’s easy to budget for recurring costs that you know you have to pay on a weekly, biweekly, or monthly basis. But what about those costs that come up less frequently—like once every quarter, six months, or year?

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These are called periodic expenses, and they can totally wreck your budget if you don’t plan for them. Below, we’ll take a look at what periodic expenses are, compare them to other types of expenses, walk through some common examples, and offer tips for how to build periodic expenses into your budget.

What is a periodic expense?

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You’ll sometimes hear periodic expenses referred to as periodic costs. While they typically come up on a predictable basis, periodic expenses recur so infrequently compared to your regular fixed expenses that they can be easy to overlook when you sit down to generate your annual budget.

Fixed vs. variable vs. periodic expenses

Business expenses come in a variety of flavors, each of which can be more or less difficult to account for in your budget. Here are the main three types of business expenses:

Fixed expenses

Fixed expenses are monthly expenses that remain stable and predictable regardless of business activity or output. Some examples include monthly payments like rent or mortgage payments, car insurance premiums, or loan repayments. You can expect to spend the same amount from month to month on these monthly bills.

Variable expenses

Variable expenses fluctuate in direct proportion to your business activity. In other words, the higher your level of sales or production, the higher your variable expenses. Examples include raw materials, direct wages, and sales commissions. While variable costs are less predictable, they’re still incurred on a regular, even monthly, basis.

Periodic expenses

A periodic expense can be either fixed or variable depending on the nature of the expense. The main differentiator is the frequency with which they’re incurred: periodic expenses only come up every few months, whether quarterly, semi-annually, annually, or even less frequently.

Examples of periodic expenses

Periodic costs are very common. In fact, you can probably categorize many of your business expenses as periodic. Some examples include:

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• Real estate property taxes: Usually paid twice a year
• Vehicle property taxes: Typically paid annually (once a year) or occasionally semi-annually (twice a year)
• Self-employment taxes: These are due on a quarterly basis
• Car registration: Typically required every few years
• Car repairs: Unfortunately, these can be unpredictable
• Equipment and car maintenance costs: These may be inconsistent
• Certain insurance premiums: Some insurance premiums, like car or life insurance, are charged once or twice a year
• Financial fees: These include annual credit card fees and similar costs
• Business travel: These might include annual or semi-annual conferences and periodic client meetings
• Professional licenses and certificates: These may need to be renewed annually or every couple years
• Professional memberships: Typically renewed annually
• Software subscriptions: May need to be renewed annually, bi-annually, or according to a different schedule depending on your contract
• Bulk purchases of raw materials: Including components and other supplies, which you may only replenish a few times a year‍
• Audits and inspections: These usually occur infrequently

How to budget for periodic business expenses

The problem with periodic expenses is that their irregularity makes it easy to forget them when you’re creating your quarterly or annual budgets. Then, when they pop up, you can be left scrambling to fill the hole blown in your budget. But it doesn’t have to be this way—and the solution might be simpler than you’d expect.

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Here’s how you can begin incorporating periodic expenses into your budget:

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1. Start by running an expense report for the previous year
2. Exclude any expenses that you know are either recurring or one-time expenses
3. The remaining figure should be the total amount that you spent on periodic expenses for the year
4. Divide this number by your budgeting period. If you budget monthly, divide this number by 12; if you budget quarterly, divide by 4.
5. Add this number as a line item in your budget moving forward to account for the expenses

Extra tips for planning for periodic expenses

Consider adding a buffer to your budget

Following the steps above is a great way to estimate your periodic expenses for the year, but it isn’t an exact science. Some years, your business may see higher periodic costs than others—for example, in years where you incur more maintenance fees or business travel expenses.

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Likewise, the resulting figure won’t account for price increases due to inflation or a loss of promotions or discounts. With this in mind, it can be a good idea to add a bit of a buffer to your periodic expense budget each year. This emergency fund can help you absorb at least some of the difference.

Invest in the right tools

While you can perform the steps above manually by going over your budget line by line, that likely isn’t the most efficient route—especially for larger businesses. The good news is there are tools that can help.

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Most expense management software, for example, can automatically categorize expenses. As long as your expenses are properly tagged and classified, you can automatically exclude recurring and one-off costs from your expense report before you even dive in.

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Likewise, a vendor management tool can help you automatically track your SaaS licenses, contracts, and subscriptions, which may go overlooked if you’re locked into long-term, multi-year contracts.

Benefits of planning for periodic expenses 

If the goal of creating a budget is to predict your business’s spending with as much accuracy as possible, then you need to be accounting for periodic expenses. Doing so can help you:

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• Prevent a budget shortfall that might otherwise send you scrambling to cover
• Gain greater transparency into where your business spends money over the long term
• Shop around for larger periodic expenses that you know are likely coming up

Manage your periodic business expenses with Ramp

Accurately tracking your business expenses is the first step to planning for periodic costs, and the right tools can make this process a lot simpler. Ramp's modern finance platform is designed to help you do just that—whether they're recurring, periodic, or one-time expenses.

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Ramp’s expense management software streamlines how businesses track and manage their spending, making financial planning, budgeting, and reporting more accurate and efficient. Automated business expense categorization instantly classifies expenses, saving valuable time and reducing errors.

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Interested in learning more about how Ramp can help you reach your financial goals? Try an interactive demo and see why Ramp customers save an average of 5% annually.