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Tips on how to calculate operating expenses

This article will explore useful tips to help you calculate operating expenses, how to determine your total business expenditure and how to calculate out your final Return on Investment. This data can help you identify which components of your business are proving too costly and which areas are most cost-effective.

Understanding your total operating expenses is essential for calculating your overall revenue. From the cost of utilities and floor refurbishment to the cost of IT software and office supplies, it is important to know exactly how much your business is spending on a daily basis.

To calculate operating expenses, you should keep a detailed list of your operational costs for each financial year (April 6 - April 5) and obtain information on all expenses that are necessary for your business operations. This information will also need to be supplied to HMRC, which may be able to offer you a number of tax reductions for costs such as electricity, IT and rent.

Non-taxable business costs include any running costs that are specifically related to the business. For exampe, phone bills, internet costs and cleaning bills can all be exempt from tax as long as they are not specifically for personal use. Promotional and advertising costs can also be exempt from tax, while certain forms of business travel may also be eligible for tax benefits.

You should also deduct all employee wages and benefits, including pension plans and heath care, although you will be obliged to pay Class 1A National Insurance Contributions to benefits given to employees who earn more than £8,500 per annum.

Gain a better understanding of how your business works

By evaluating your final operational expenditure, you are in a better position to expand your business, improve its cost-efficiency and manage your long term finances. For more information on how to calculate operating expenses, take a look at the HMRC website, which provides more detailed information on business tax relief and general financial advice.

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