![]() But if that’s your only focus, you’re probably only postponing the day of reckoning. Sure, operating expenses may have to be trimmed. For most companies, it’s better to manage for the long haul and to focus on increasing profitable sales and reducing costs (of goods sold). Morale suffers and that’s not the only danger. What is the difference between general expenses and sundry expenses 8. What is the difference between direct and general expenses 7. Is general expenses a liability or asset 6. That’s why so many CEOs taking over troubled companies start by cutting the payroll in the overhead expense areas. How do you find general and administrative expenses 5. ![]() This is usually the only short-term solution available. ![]() Three, it can cut operating expenses (SG&A), which almost always means reducing the headcount. Two, it can figure out how to lower production costs and run more efficiently. This solution almost always requires a good deal of time. Allocation of selling, general and administrative expenses for pricing and customer profitability measurement - Case: Finnish forest industry company. For example wages paid to administrative roles. One, the company can increase profitable sales. Administrative expenses are indirect expenses as they’re related to operating and maintaining a business overall. What if a company’s net profit is lower than it ought to be? Aside from monkeying with the books, there are only three possible fixes for low profitability. Some companies might show the SG&A selling, general, and administrative expenses in a single line on the income statement. (Excerpts from Financial Intelligence, Chapter 8 – Costs and Expenses) ![]() In this sample income statement, you can see how SG&A expenses are deducted from revenues along with other expenses to yield profit. Sign up for our online financial statement training and get the income statement training you need. Often a company will make this distinction based on the relative size of each. Some companies refer to operating expenses as SG&A, or just G&A, while others treat G&A as one subcategory and give sales and marketing (and possibly other specific categories of expenses) its own line, all under the heading of operating expenses. SG&A stands for Selling, General, and Administrative expenses and includes the day to day expenses not directly related to manufacturing the product or selling the service. For many companies, operating expenses and SG&A are the same thing. Here is another place where language can be confusing. ![]()
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