Expense

What is an expense?

An expense is any cost your business incurs in the process of earning revenue. Every dollar you spend on materials, tools, insurance, gas, phone service, or subcontractor wages is an expense. Tracking expenses accurately is essential for understanding your true profit and preparing your taxes.

For contractors and small business owners, expenses directly impact how much money you actually take home from each job.

Types of business expenses

Expenses typically fall into categories:

• Operating expenses — Day-to-day costs like rent, utilities, insurance, and office supplies
• Cost of goods sold — Direct costs tied to specific jobs: materials, subcontractors, permits
• Fixed expenses — Costs that stay the same regardless of work volume: rent, insurance premiums
• Variable expenses — Costs that change with activity: materials, fuel, job-specific labor

Why tracking expenses matters

Proper expense tracking helps you price jobs profitably, claim tax deductions you're entitled to, and understand where your money actually goes. Many business owners are surprised when they see how small expenses add up over time.