Costs related to operations and management, collectively known as SG&A expenses.
In the business world, Selling, General, and Administrative (SG&A) expenses play a significant role in a company's profitability. These costs, which include salary and bonuses for accounting personnel, information technology, human resources, executive salaries, postal and telecommunications expenses, professional fees, travel expenses, conferences, meetings, and various sales expenses such as logistics costs, shipping expenses, marketing expenses, website maintenance costs, and salesforce salaries and commissions, are operating costs unrelated to the production of goods or services.
Management usually maintains strict controls over SG&A expenses, as they are the main intention in carrying out operational efficiency and increasing profits quickly. Observing the ratio SG&A expenses to revenue over time can indicate increased pressure on the company's profitability.
To calculate SG&A expenses, simply sum selling expenses, general expenses, and administrative expenses. General expenses are categorized as fixed costs because they must be paid regardless of production or sales volume, and include daily operating costs such as rental expenses, utilities, and office equipment. SG&A expenses, when they rise, reduce net profit.
Common strategies to reduce SG&A expenses involve moving to a cheaper office space or adopting remote work to reduce facility costs, cutting back on business travel, and optimizing operational inefficiencies without resorting to headcount reductions. These actions can result in significant cost savings while preserving quality and strategic capabilities.
Relocating to more affordable office space or reducing office footprint through remote work policies lowers rent and utilities. Limiting non-essential business travel reduces related expenses. Rather than cutting headcount, addressing inefficiencies in non-labor spend and operational processes helps unlock savings sustainably.
A more proactive approach to cost management is Zero-Based Budgeting (ZBO), which involves scrutinizing every expense line from the ground up to distinguish low-value spending to be cut from strategic investments to be preserved or grown. This approach prevents indiscriminate cuts and enables reallocating funds toward high-value areas like technology, automation, or talent development to balance cost discipline with growth.
Implementing systematic cost governance models and benchmarking can also help continuously optimize SG&A expense structure for long-term success. Data-driven governance ensures that decisions are made based on objective, factual analysis, rather than assumptions or intuition.
In sum, the most effective strategies look beyond short-term savings toward sustainable, strategic cost management by targeting inefficiencies and optimizing spend allocation rather than simply reducing headcount. By doing so, companies can increase profits without sacrificing business, providing greater flexibility in pricing strategies and improving cash flow.
Managing personal-finance involves scrutinizing every expense line from the ground up, similar to Zero-Base Budgeting (ZBO), to distinguish unnecessary spending from strategic investments in areas like education or health, enabling a more sustainable balance between savings and growth.
In one's personal-finance realm, reducing business-related expenses such as office rent, utilities, and travel expenses can result in significant cost savings while preserving quality and strategic capabilities in life's endeavors.
