Financial expenses: what they are and how to control them – If you want to know what economic costs are and how they are divided, follow us through the following content, where we will address the types of financial expenses you should know about and how to achieve control of these resources.

Contents:

  • What are the financial expenses?
  • financial expenses accounting
  • Bank fees
  • Interest on loans or credits
  • multi-currency operations
  • dividend payment
  • insurance premiums
  • Costs for an update of provisions
  • Expenses generated by the loss of value of the asset
  • How to calculate the financial costs?
  • Why should expenses be controlled?
  • How to control these expenses?

What are the financial expenses?

A fundamental part of a company’s administration is knowing what expenses it will face. If we are clear about the financial costs, we will prepare ourselves and thus avoid any inconvenience.

Among the different types of financial expenses are operating ones connected to the sale of goods and armed forces. This item includes salaries, advertising and payment of rent for the place where the business is located.

There are also administrative costs. These are not directly related to the sale or production of goods or services; they are expenses linked to the organization’s operation.

Other expenses to contemplate are the extraordinary ones since they are generally unforeseen expenses that every business has due to exceptional situations.

Financial expenses are another item that must be paid a lot of attention to since they are those generated by obtaining a bank loan.

In addition, the financial expenses count all interest expenses. These refer to what a third party earns for giving credit to a business or person and are calculated based on an agreed percentage of the amount of money granted.

For example, all credit cards have a percentage of interest generated each month, depending on what has been spent. This can then be included in interest expenses or financial expenses.

 

Regarding banks, in addition, there are commissions: a type of financial expense that depends on the banking institution. These can be due to various reasons: late payments or cancellation of a loan, among others.

Negative adjustments are generated when transactions with different currencies are also considered. Another type of expense is insurance premiums.

The preceding encompasses what financial expenses are. You can identify them and learn more about them in the following section.

financial expenses accounting

We can consider that the financial expenses within your accounting are the following.

Bank fees

They are financial expenses paid to banks for opening or managing an account. It is essential to consider the payment for the use of company credit cards since daily operations can be financed, that is, financing expenses of our company.

In this way, most of the services a bank provides to the company or company charge a certain percentage of interest. So, before opening an account or processing a praise card, it is essential to know the goods and commissions the bank will charge.

Interest on loans or credits

The interest paid for loans or credits with financial institutions or banking organizations counts within this type of financial expense. From the moment the contract is signed, the commitment is established that the company will pay a certain percentage of interest for the loan. In this type of credit, monthly payments are the most common.

The amount of money that is paid in interest expense will depend entirely on the amount of money that is awarded. This is why we must know the conditions when requesting it and how much money from the loan will be used for payment.

multi-currency operations

Multi-currency operations are also among the most well-known financial expenses, which correspond to payments in foreign currencies received by companies. Here it must be considered that a negative margin can be given because the value of the money it is operating can change.

dividend payment

It refers to the expenses that come from profits and are granted to shareholders based on the growth that the company registers annually.

The insurance premiums contracted by the company for facilities, products, vehicles, employees, etc., become a financial expense for the company.