The Expense Playbook: A Startup’s Guide to One-Time and Recurring Expenses

Starting a business is akin to embarking on an adventurous journey. You have an idea that could revolutionize the world, a capable team to back you up, and a promising future ahead. But let’s not sugarcoat it: money matters. Proper cost management can often determine whether your venture succeeds or fails. To help you navigate this financial maze, The Expense Playbook serves as a comprehensive guide to managing two critical categories of costs: One-time and recurring expenses.

In this blog, we delve into the basics of startup expense management, compare one-time and recurring expenses, and share tips to regulate start-up costs effectively. With this Expense Playbook, let’s dive into how to tackle these issues like a pro.

What is startup expense management?

Expense management involves tracking, analysing and optimising costs to ensure optimal resource allocation. For startups, expense management isn’t just a best practice; it’s an absolute necessity.

Why is expense management crucial?

Effectively managing your startup costs offers several key benefits:

• Preserves cash flow: Makes sure you always have the funds to pay the bills, and to reinvest in growth.
• Attracts investors: A well-managed budget is a big green flag for potential investors, reflecting fiscal discipline.
• Builds a safety net: It helps you stay afloat through downturns or unexpected challenges.

The risks of poor expense management

• Cash shortages that slow down business activities.
• Poor financial discipline makes it difficult to attract or retain investors.
• Failure to achieve growth objectives due to ineffective use of available funds.

What expenses should a startup budget for?

Before diving deeper, let’s look at the primary expenses startups should plan for:

One-time expenses:

These include investments such as: 

• Office furniture
• Technology and equipment
• Logo design (Brand ID, web URL, business cards, etc.)
• Licences and legal fees
• Initial inventory or supplies

Recurring expenses:

These include: 

• Salaries and wages
• Rent, utilities, and internet
• Tools such as SaaS (Subscription services – SaaS tools, CRMs, etc.)
• Marketing campaigns
• Maintenance and upkeep

One-time expenses: Building the foundation

One-time expenses are costs incurred at the start or during specific milestones in your business journey.

Examples of one-time expenses

• Office setup: Furnishing your workspace with chairs, desks, and other essentials.
• Technology purchases: Purchasing office computers, office printers, or other office equipment.
• Brand development: Creating your company logo, developing a website, and launching initial advertising.
• Legal and administrative fees: Securing licences, and permits and drafting legal agreements.

Where should you make one-time investments?

• Core infrastructure: Invest in quality tools and technology to support your operations. 
• Brand identity: A professional logo and website make a lasting first impression on clients.
• Legal compliance: Adhere to local laws to avoid penalties in the future.

Tips for estimating and planning one-time expenses

• Conduct research: Compare costs of equipment, services, and prices from multiple vendors.
• Use industry benchmarks: Learn standard pricing from Industry experts or online resources.
• Create a buffer: Include a 15-20% contingency for unforeseen costs.
• Track every penny: Use accounting software to record all one-time expenses.

Recurring expenses: Keeping the engine running

Recurring expenses are regular, predictable costs necessary to sustain your business.

Examples of recurring expense 

• Employee salaries: Often the largest recurring cost for startups with a growing team.
• Software subscriptions: Tools like Slack, Zoom, or accounting software.
• Marketing: Monthly ad spend on platforms like Google or Facebook.
• Utilities and rent: Office space, electricity, and internet costs.

Where should you focus recurring spending?

• Team building: Pay competitive wages to attract and retain top talent.
• Productivity tools: Get software that makes your work effortless and improves efficiency and collaboration.
• Customer engagement: Allocate resources to marketing efforts that attract and retain customers.

Strategies for planning recurring expenses

• Automate payments: Set up auto-pay for subscriptions and bills to avoid late fees.
• Negotiate contracts: Secure discounts or lock in lower rates with long-term commitments.
• Regular audit expenses: Review recurring charges to get rid of unnecessary services.
• Plan for seasonality: Adjust budgets for marketing or staffing based on demand cycles.

Comparing one-time and recurring expenses 

Balancing one-time and recurring expenses is vital for success. The former lays the foundation, while the latter is the building block. Together, they create a stable environment for your business.

Case Study: A SaaS startup

One-time expense: Building a website and investing in cloud infrastructure.

Recurring expense: Ongoing digital marketing and monthly server hosting.

The startup’s initial tech investment enabled smooth operations while recurring marketing expenses ensured a steady flow of customers.

Best practices for managing startup expenses

• Create a detailed budget: Forecast at least 12 months of expenses, categorizing each cost.
• Track expenses in real-time: Use tools like Tally or QuickBooks to avoid surprises.
• Separate fixed and variable costs: Distinguish between non-negotiable fixed costs (like rent) and adjustable variable costs (e.g.marketing) that can be scaled up or down.
• Negotiate contracts: Save money by negotiating with landlords, suppliers or service providers.

Leveraging technology for expense management

Modern tools can revolutionize cost control efforts. Here are a few to consider:

Accounting software: For seamless tracking, try Tally, FreshBooks, or Xero.

Expense management apps: For example, there are applications such as Expensify for receipt and cashback tracking.

Startup expense management is not just about crunching numbers— it’s about making the right financial decision. Knowing and balancing your one-time and recurring spending will help you stay stable financially, take advantage of growth opportunities, and overcome your competitors.