A good rule of thumb for SG&A is to think of it as everything that doesn’t go into COGS (cost of goods sold).
SG&A expenses are a type of operating expense, and they show up on the income statement. They may be fixed or variable. For example, think of the cost of your storefront where you sell items vs. the commission you pay your salespeople for each item sold. Both are SG&A expenses, but your storefront cost is fixed while your commission cost is variable.
There is also a difference between sales expenses and general and administrative expenses. Both cannot be directly tied to the production of your product or delivery of your service, but they have some differences: Sales expenses involve everything it takes to make the sale. This includes the facilities used for your storefront, advertising, sales commissions, and sales director’s salary. General and administrative expenses are what is commonly referred to as “overhead.” Think rent, utilities, salaries for management (excluding managers in your sales department), IT costs, legal costs, and the like.
Curious about how to put your SG&A on an income statement? It will look a little different depending on what kind of business you own and how you decide to account for your costs. Below is an example of how it might look for a retailer.
Now you may be wondering, what exactly is a good benchmark SG&A ratio? 10%? 25%? The amount of SG&A that makes sense differs from company to company. It’s dependent on your industry, your stage of growth, your overall strategy, and quite a few things beyond that. What’s important is that you monitor your SG&A ratio and respond to what you see.
The amount of SG&A that makes sense differs from company to company. It’s dependent on your industry, your stage of growth, your overall strategy, and quite a few things beyond that. Average SG&A Costs by Industry According to information compiled by saibooks.com in their SG&A Benchmark reports, these were the average ratios for SG&A expenses to sales in different industries in 2019. These specifically were for companies with sales of less than $100 million a year.
OWL BOOKKEEPING AND CFO SERVICES HELPS WITH:
Financial Statements -Cash Flow Forecasting -Key Business Performance Indicators (KPIs) -Budget Implementation And Oversight -Financial Insights -Employee Termination Counseling
LEARN MORE ABOUT OWL'S SERVICES