Utility expenses are one of those expense areas that get overlooked. The question to ask when planning for and reviewing your monthly utility expenses is, “Can this expense be eliminated?” Any expense that isn’t directly supporting the business should be eliminated because every dollar spent on an unnecessary expense is a dollar stolen from your bottom-line and cash flow.
Overview
Utility expenses range from electric, gas, water, sewer, garbage, and security—to internet service providers, cell phones, and landlines. These expenses are not easily allocated to a product or job and, as a result, are considered “overhead” to the business. These expenses can also be difficult to project when problems occur with a needed utility that requires out-of-pocket payment to repair.
Utility expenses may also fluctuate widely during the year. If this is the case, it’s important to explore the options of flex-pay, competitive rates, or budget billing with your utility providers. Energy audit programs can also help improve your business’s energy efficiency, resulting in a more accurate prediction of these month-to-month expenses.
Lastly, utility costs do add up, and they are difficult to reduce in the short term, so be very careful in every contract you sign because you can’t quickly pull these costs down once you’ve committed.
A few questions to consider involving utility expenses:
Do you have utility expenses that fluctuate widely during the year? ___ Yes ___ No. If yes, who is the person accountable for managing your utility expenses down?
Do you have a “rainy day” fund of monies set aside to pay for unexpected business costs? ___ Yes ___ No. If yes, how much cash do you have set aside? $____________. If no, how much cash should you set aside? $_____________.