Outside services expenses

Outside services refer to the services a business pays for that aren’t performed by its own employees. Examples can include consulting, marketing, and maintenance services. They allow businesses to fill temporary skills gaps or bring in specialized professionals on a short-term basis.

By hiring outside services, businesses can:

• Access expert knowledge 

• Reduce overhead costs

• Stay competitive

What are outside services expenses?

Outside services expenses are the costs a business incurs when it hires these professionals. These are typically classified as overhead costs in a company’s financial statement. 

If you hire a consultant to draft a business contract with a supplier, the amount you pay would be considered an outside service expense.

Outside services expenses can be either fixed or variable, as follows:

• Fixed: Fixed expenses remain the same each period, which makes it easier for you to plan your budget. For example, you might pay a flat monthly fee for cleaning services or a yearly retainer fee for legal services. 

• Variable: Variable expenses are costs that change from month to month, typically due to changes in business operations. For example, you might expect to pay more in advertising costs during larger seasonal campaigns.

Tracking fixed and variable expenses for outside services is essential for proper financial management. It helps you understand the costs of running your business and aids in strategic financial planning.

What are the different categories of outside services expenses?

As a business owner, you wear many hats. However, you risk becoming a bottleneck if you’re involved in every aspect of your business.

Here are categories of outside services you can use to lighten your workload.

Accounting 

Proper accounting is crucial for any business, as it helps provide a clear picture of its financial health. To help manage the financial aspects of your business, you can work with an outsourced accounting firm or tax professional and get assistance with the following:

• Accounts receivable and accounts payable

• Payroll management

• Tax preparation

• Internal auditing

• Financial planning

Expenses for accounting services depend on various factors, including the type and size of your business, the services you require, and the accountant’s level of experience. 

Marketing

No matter how compelling your product or service is, customers won’t buy it if they don’t know about it. Marketing and advertising services enable you to reach your target audience and bring in sales.

These services can encompass both traditional and digital channels, such as:

• Radio and TV commercials

• Billboards and print ads

• Search engine optimization (SEO)

• Content marketing 

• Social media marketing

• Pay-per-click (PPC) advertising

How much you spend on marketing and advertising depends on the scale and type of your campaign.

Legal

As your business grows, you’ll face new challenges — one of them being navigating legal matters. Unless you’re well-versed in the law, it’s best to seek legal counsel to ensure you’re fully compliant. 

Legal services can include:

• Drafting and reviewing contracts

• Ensuring compliance with labor laws

• Representing your company in legal proceedings

Information technology (IT)

Building the right infrastructure to support your business’ growth requires specialized knowledge that you may not have in-house. Hiring IT services can help with:

• Cloud computing

• Network maintenance and security

• Data storage and backup

• Technical support

• Software development

An IT consultant can also help you set up your infrastructure to use technologies like customer relationship software (CRM) and enterprise resource planning (ERP) throughout your business.