What are general and administrative expenses?

Even travel expenses for management, detailed in IRS Publication 463, might fall under G&A if related to overall company administration rather than sales or specific projects. The general and administrative expenses are then deducted from the gross margin to arrive at net income. Examples of employee benefits include expenses incurred on company outings, team-building exercises, and professional growth.

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Why Does G&A Matter in Business?

This category includes compensation for personnel who provide overall support and management for the business. Salaries for executive leadership, human resources, accounting, legal staff, and general administrative support personnel fall under G&A. Explore the foundational costs that sustain a business’s daily operations, distinct from direct production or sales expenses.

Selling Expenses

This metric helps you budget more effectively, compare your efficiency against industry benchmarks, and assess your company’s financial health. Monitoring your G&A rate regularly enables better cost control and more informed financial decisions for sustainable growth. General and administrative (G&A) expenses are the costs your business incurs to maintain daily operations. They’re day-to-day operating expenses, such as rent and office supplies, that keep your business operational. They can often be reduced in a pinch such as by moving operations to a new facility where the rent and overhead are cheaper or by reducing pay or benefits for new employees going forward. Administrative expenses don’t directly contribute to sales or production so there’s a strong incentive for management to lower a company’s general and administrative expenses.

Why are general and administrative expenses important to track?

For example, even if you don’t sign any new accounts in November, you’ll still need to pay for rent, utilities, and continue supporting existing customers. These baseline costs make it important to plan carefully and ensure your operations remain sustainable. G&A expenses can balloon fast—sometimes reaching up to 30 percent of operational costs—especially in high-growth environments where investments are happening across the board. Often, this is the result of either unchecked spending or a misalignment between costs and the company’s growth rate. Use your financial reporting tool to dig into historical data on key G&A expenses like salaries, rent, and office supplies.

General and administrative expenses differ depending on the kind of business, all businesses are not similar, and each company has unique features. Some of general and administrative expense the essential costs incurred by startups include marketing and advertising expense. Determining how to properly segregate costs between the different indirect cost pools can be complex. For more information on the most common mistakes in reporting indirect costs and best practices for how to correct them, check out this article. If you have questions about indirect cost pools or general questions about your government contracting business, reach out to our government contractor experts today. Disciplined accounting of G&A expenses has a real, measurable impact on your company’s bottom line.

How Do Businesses Manage or Reduce G&A Costs?

• Clear distinctions between G&A and SG&A help you avoid misclassification and improve financial reporting.
• This distinction is critical for accurate financial reporting and understanding a company’s profitability.
• Combining the two gives a more holistic view of the expenses required to keep a business running at its current level.

Planning for them accurately is just as important as forecasting sales or product costs. Whether you sell 100 units or 10,000, you still need to pay your rent and your finance team’s salaries. So while general and administrative expenses keep your business functioning, operating expenses are tied directly to the business activities that generate revenue. These are your classic general and administrative expenses — overheads that cover the day-to-day management and operation of your business. You can also tee up automated workflows that help you control spend, like triggering an alert when a department’s expenses sharply increase.

• These tools are especially helpful for SaaS companies looking to monitor G&A costs and other core metrics in real time.
• These time-consuming processes are prone to human error, leading to financial discrepancies and compliance risks.
• Some grow with headcount (like HR software fees or insurance), while others stay flat (like company secretary fees).
• Recognizing these differences enables businesses to control costs more effectively, leading to improved financial health and sustainability.

Management can then adjust the admin expenses and staff personnel to lower the general and admin expenses. G&A expenses include rent, utilities, insurance, legal fees, and certain salaries. Typically, any cost that does not link to the production or the selling process and is not part of research and development is classified as a general and administrative expense. As a result, general and administrative expenses do not fall under cost of goods sold and are not inventory. General and administrative expenses are also typically fixed costs in nature, as they would stay the same regardless of the level of sales that occur.

These expenses, while not directly contributing to revenue, are essential for maintaining daily operations and supporting long-term growth. They don’t directly contribute to generating revenue but are critical for maintaining daily operations. The top aggregated line item on a statement of income is always net revenues. The total cost of goods sold is deducted from this figure to determine the gross margin. The general and administrative expenses are always deducted from the gross margin in a consolidated income statement to arrive at net income. Not all general and administrative expenses are grouped under one category; for example, fees and interest are often classified as their own line item when deducting expenses to arrive at net income.

Your business still benefits from professional expertise without shouldering additional overheads. Identify inefficiencies, streamline spending, and regularly review expenditures to ensure that purchases contribute to company growth. If you’re unclear about where certain expenses belong—including G&A—your financial insights can quickly become misleading, making it harder to stay on course. That clarity gives you the insight needed to drive smarter decisions—and support growth that’s both ambitious and sustainable. Then, implement appropriate changes, which may involve adjusting the budget, adjusting spending behaviors, or finding opportunities to slash costs. Monitor how actual spending stacks up against your budget, and adjust categories dynamically as the financial period progresses.