Cash Flow Solutions

Managing Recurring Expenses

Smiling barista tracks decreasing business expenses in notebook

Paying bills is a necessary part of running a successful small business, but it can be time-consuming. Using autopay to manage some or all your recurring expenses can streamline the bill payment process. Before implementing autopay for recurring expenses, here are some pros and cons of a “set it and forget it” approach. 

What are recurring expenses? 

Recurring expenses are your business’s ongoing costs. They’re the expenses that you must pay regularly to keep your business running smoothly. You might pay recurring expenses weekly, monthly, bi-monthly, or quarterly. Some examples of recurring expenses for a business include: 

  • Rent or lease payments 
  • Mortgage payments, if you own your premises 
  • Utilities 
  • Employee payroll 
  • Taxes and insurance 
  • Marketing and advertising costs 
  • Website hosting and email service fees 
  • Professional services, such as quarterly tax preparation or payroll management 
  • Subscription services (i.e., cloud accounting software or collaboration software) 

Recurring expenses can show up on key financial documents, including your balance sheet, cash flow statement, and profit and loss statement. 

What is autopay? 

Autopay allows you to schedule bill payments from your business bank account. For example, you could schedule an automatic payment for utility bills from your business checking account on the same due date each month. 

Utilizing autopay can help you to avoid late payments, which can trigger late fees — adding to your overall costs. Paying certain bills late, such as loans or credit lines, can also impact your credit score. If you’re paying suppliers late, you may not be able to access key materials, further affecting your business. 

What are some potential concerns for setting and forgetting recurring expenses? 

Autopay may not make sense for every business or every bill. Here are some potential downsides to consider when using autopay before putting it to work. 

Cash flow issues 

Setting up automatic payments for recurring expenses that occur a few times a year could impact your cash flow if you don’t remember to include them on your monthly expense sheet. You may be used to seeing the same expenses drafted from your account each month and may need to adjust the cash you keep on hand in your business checking account. 

A quarterly or semiannual expense could reduce your available cash or even leave your account in overdraft. The typical overdraft fee is $35, which could add up quickly. 

Varying autopay amounts 

Some recurring expenses may be fixed, meaning you pay the same amount from month to month. Rent or lease payments and subscription services are two examples of fixed recurring costs for a business. 

Other recurring expenses, however, may fluctuate from month to month. Utility bills, for instance, might be higher in the winter or summer months and lower in the spring and fall. Inflation can also push up the costs of things like fuel for company vehicles or inventory that requires regular replenishment. 

Timing of withdrawals 

When you run a small business, you know that payments don’t always arrive on time. Depending on the steadiness of your cash flow, you could end up with a funding shortfall. If the money you’re expecting hasn’t arrived, you may need to reschedule or cancel recurring payments to avoid overdraft or non-sufficient funds (NSF) fees. 

The cost of subscriptions 

Sometimes it’s the little expenses — like subscriptions — that can disrupt your finances. 

For example, you might sign up for a monthly subscription plan for an accounting software program. The plan may start at a lower, introductory price per month but may increase to a premium once that program ends. 

Even if the price increase is as few as $5 a month, you’ll eventually see higher prices across all your subscriptions, which can add up. And you could miss those changes if you set those expenses on autopay and aren’t checking them regularly. 

Proactive steps to take when recurring expenses climb 

Recurring expenses aren’t always static. Inflation can cause increases while changing provider policies may trigger higher prices. If you’re using or considering autopay to cover recurring expenses, here are a few tips to handle climbing costs: 

  • Review your recurring expenses to track cost changes month to month and year to year. 
  • Consider shopping around for new service providers if you think you can get a better deal on certain recurring expenses. 
  • Fine-tune spending controls on employee credit cards to better control their use. 
  • Conduct an audit of subscription services to see which ones you can eliminate. 
  • Ask service providers about any discounts they might offer for using autopay. 

You can also use an online analytics tool to take a deeper dive into your business expenses. The more data you have about your spending patterns, the more thorough your financial picture. Use these patterns and insights to help you make informed money in, money out decisions with confidence.  

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