For small business owners, knowing your monthly operating expenses is crucial for managing cash flow, staying profitable, and planning for lean months. Operating expenses are recurring costs necessary to run your business, but they are not directly tied to producing goods or services (those fall under Cost of Goods Sold). Examples include rent, utilities, payroll, insurance premiums, subscriptions, and other ongoing overhead.

Effectively tracking and understanding these costs helps you make smarter financial decisions, avoid cash shortfalls, and ensure your business runs smoothly year-round.

1. Identify All Operational Expenses

The first step is knowing exactly what your operating expenses are. Review past months’ spending and look for recurring patterns. These may include:

Monthly rent or mortgage payments

Utilities such as electricity, water, internet, and phone

Employee payroll and benefits

Insurance premiums (annual, quarterly, or semi-annual)

Subscriptions for software, tools, or services

Loan or credit payments

Any contracts or agreements that automatically debit your account

Gather supporting documents like receipts, invoices, or bank statements. If you use accounting software, generate monthly expense reports to make this process easier. The goal is to capture every expense that is necessary to keep your business running, even if it only occurs quarterly or annually.

2. Break Down Irregular Expenses to a Monthly Amount

Not all expenses occur monthly, but you still need to account for them in your monthly budget. To do this:

For quarterly bills, divide the total by 3

For semi-annual bills, divide by 6

For annual bills, divide by 12

This will give you a monthly equivalent for each expense, allowing you to accurately plan your cash flow.

3. Calculate Your Total Monthly Operating Expenses

Once all expenses have been identified and broken down to a monthly amount, add them together. This total is your Monthly Operating Expense (MOE). Knowing this number gives you a clear benchmark for budgeting, forecasting, and setting aside funds for slower months.

4. Use Your Monthly Operating Expense to Manage Cash Flow

Understanding your MOE allows you to:

Plan for lean periods: Set aside funds each month to cover expenses during slower seasons.

Create realistic budgets: Know how much revenue is required to break even.

Identify areas to reduce costs: Compare expenses and eliminate unnecessary overhead.

Forecast growth: Calculate how much additional revenue is needed to expand operations or hire staff.

5. Tips for Streamlining Expense Management

Automate tracking using accounting software like QuickBooks, Xero, or FreshBooks.

Keep all receipts, invoices, and bills organized in one place, either digitally or physically.

Schedule monthly review sessions to update your MOE and ensure accuracy.

Regularly reassess contracts, subscriptions, and utility costs to identify savings opportunities.

Consider hiring a bookkeeper if managing these calculations becomes overwhelming.

Why Knowing Your Monthly Operating Expenses Matters

Accurate knowledge of your operating expenses is essential to running a financially healthy business. It allows you to:

Avoid unexpected cash flow issues

Make informed budgeting decisions

Prepare for seasonal fluctuations

Maximize profitability and business sustainability

At Keep A Count, we help small business owners calculate, track, and manage their operating expenses so you can focus on growing your business instead of worrying about cash flow.

Call 815-439-8022 or contact us today to get professional bookkeeping support and make sure your monthly operating expenses are fully under control.