SalevaShop expenses: what to record, how often, and what the monthly total tells you
A simple way for a small shop to record its running costs: which expenses to write down, a short list of categories, a daily habit that takes two minutes, and how to read the monthly total against your sales and profit. Worked examples in rupees.
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The electricity bill arrives and it is higher than last month. You pay it from the drawer. That afternoon the boy who brings tea is paid, the rickshaw for the morning delivery is paid, and a new tube light goes up over the counter. By evening the drawer is short of what the day's sales said it should hold, and you know why, roughly. By the end of the month you no longer know why at all.
Every shop spends money to stay open. The shops that know their real profit are not the ones that spend less. They are the ones that write down what they spend, the same way, every day. This article shows how to do that with very little effort, and what the monthly total tells you once you have it.
What counts as a shop expense
An expense is money the shop spends to run, that is not stock bought for resale. That second part matters. When you pay a supplier for goods you will sell, that is a purchase. It turns into cost of goods when the goods are sold. Mixing purchases into expenses counts the same money twice and makes the shop look poorer than it is.
Common shop expenses:
- Rent for the shop or the store room.
- Electricity, gas and water.
- Wages for helpers and counter staff, including the extra paid at Eid.
- Transport: rickshaw fare to the wholesale market, delivery charges, fuel for the shop's bike.
- Phone and internet used for the shop.
- Repairs and maintenance: a broken shutter, a fan, a fridge compressor, paint.
- Small daily costs: tea for staff, cleaning supplies, plastic bags, receipt rolls.
- Fees and charges: market committee, licence renewals, bank or wallet charges.
And some things that are not shop expenses:
- Stock you will sell. That is a purchase.
- Money you take home for the household. That is a drawing. It reduces the cash in the shop, but it is not a cost of running it. Profit vs cash explains why keeping the two apart matters so much.
- A new shelf, a fridge or a scale. These are equipment that lasts years. Many shops record them as an expense in the month they are bought, which is simple but makes that one month look bad. Note them clearly so you can see why. For how to treat them in formal accounts, ask your accountant.
Keep the category list short
Categories are what turn a list of payments into something you can read. The temptation is to make many of them. Resist it. A list of twenty categories means that every time you record a payment you stop and wonder which one it belongs to, and before long you choose at random.
Six to eight categories cover almost every small shop. Here is one example list:
| Category | What goes in it |
|---|---|
| Rent | Shop and store room rent |
| Utilities | Electricity, gas, water, phone, internet |
| Wages | Staff pay, overtime, Eid extra |
| Transport | Fares, delivery charges, fuel |
| Repairs | Fixing anything in the shop |
| Shop supplies | Bags, receipt rolls, cleaning, tea |
| Fees | Committee, licence, bank and wallet charges |
| Other | Anything that fits nowhere else |
Watch the "Other" line. If it grows to more than a small part of the month, look at what is in it. Usually one kind of payment keeps appearing there and deserves its own category. If it is a mix of everything, the categories are fine and someone is not choosing.
Once you have a list, keep it for at least a year. Changing categories every few months makes it impossible to compare one month with the next, which is the main reason to have categories in the first place.
Record it the same day
The single habit that makes expense records useful is writing each one down on the day it happens. An expense remembered at the end of the month is usually only half remembered. The big ones come back; the hundreds of small ones do not, and together they are often larger than the rent.
A routine that works for most shops:
- Pay from one place. Decide whether expenses come from the drawer or from a separate envelope, and stick to it. Paying some from your pocket and some from the drawer is how expenses get lost.
- Record before the money leaves the counter, or straight after. Amount, category and a few words: "Tube light, counter."
- Keep the slip if there is one. A spike on the wall or an envelope for the month is enough. When a figure looks odd later, the slip settles it.
- Add the day's expenses to the closing count. When you count the drawer at night, the expenses paid from it explain part of the difference between sales and cash. The routine in closing the day has a line for this.
Staff who pay small expenses from the drawer should follow the same rule: no money out without a line written. A helper who is allowed to take Rs 200 for a rickshaw is fine. A helper who takes it and says nothing makes your cash count wrong every evening, and you will not know which shortages are real.
Fixed costs and running costs
Once a month of expenses is recorded, sort them in your head into two kinds. It makes the total much easier to understand.
Fixed costs are roughly the same every month whether the shop is busy or quiet: rent, staff wages, the internet package, committee fees. You know them in advance.
Running costs move with how busy the shop is, or with the season: electricity in summer, transport when you buy more often, bags and receipt rolls when sales rise.
The fixed costs set the floor. They are what the shop must earn in gross profit every month before it earns anything for you. If your fixed costs are Rs 90,000 a month in this example, and your goods carry an average margin of 20%, you need about Rs 4,50,000 of sales a month just to pay them. The free break-even calculator works this out from your own figures, and is worth running again whenever the rent or a wage changes. If you are working out a helper's monthly pay with overtime or leave, the salary calculator does the arithmetic.
Running costs are where most of the savings hide, because they creep. Nobody decides to spend more on transport. It happens a trip at a time.
Read the monthly total in three ways
At the end of the month, add up each category and the grand total. Then look at it in three ways. Each takes a minute.
1. Against last month
Put the two months side by side, category by category. You are looking for lines that moved and for a reason you can name. Electricity up in June: the fridge and fans, expected. Transport up by half in a quiet month: worth a question. Repairs high once: fine. Repairs high three months running: something needs replacing rather than fixing again.
2. Against sales
Divide the month's expenses by the month's sales. In this example, Rs 1,10,000 of expenses on Rs 9,00,000 of sales is about 12%. The number itself means little on its own, because every kind of shop is different. What matters is how it moves. If sales stay level and the percentage rises month after month, costs are growing faster than the shop.
3. Against gross profit
This is the one that decides whether the shop is earning. Gross profit is what you made on the goods you sold: sales minus what those goods cost you. Expenses come out of gross profit, and what is left is net profit.
| Line | Example month |
|---|---|
| Sales | Rs 9,00,000 |
| Cost of the goods sold | Rs 7,20,000 |
| Gross profit | Rs 1,80,000 |
| Expenses | Rs 1,10,000 |
| Net profit | Rs 70,000 |
All figures are examples. In this month, expenses took about 60% of gross profit. If they had been Rs 1,60,000 instead, the shop would have been just as busy and kept only Rs 20,000. That is why a shop that does not record expenses cannot know its profit: the difference between a good month and a poor one can sit entirely in this line.
Expenses come out of gross profit, not out of sales. A shop that only watches sales can grow busier every month and keep less.
Cutting costs without hurting the shop
When the monthly total is too high, the first instinct is to cut whatever is biggest. Rent and wages are usually the biggest, and they are the hardest and most damaging to cut. Start with the lines that are easy to change and do not touch customers.
- Transport. Fewer, planned trips to the wholesale market. Combining two half-orders into one full order often saves a fare and your time. Buying well from suppliers covers how to plan orders.
- Electricity. Lights and fans off in the store room, the fridge door seal checked, the fridge set to the temperature it needs rather than colder.
- Shop supplies. Bags given only when a customer needs one. Receipt rolls bought by the box rather than one at a time.
- Phone and wallet charges. Check whether you are paying for packages or charges you no longer use.
- Repairs. If the same thing breaks again and again, the repairs may already have cost more than a replacement.
What not to cut: the things customers notice. Lights over the products, a clean floor, enough staff at the busy hour. Saving a little there often costs more in lost sales than it saves.
If expenses look right and the shop still keeps too little, the problem may be on the other side: margins that are too thin. How to price products is the next place to look.
Questions shopkeepers ask
Should I record very small expenses like tea and a few bags?
Yes. Each one is small, but together they are often a few thousand rupees a month, and leaving them out makes your profit look higher than it is. If writing every cup of tea feels like too much, keep a fixed amount aside for small daily costs each week, record that amount once, and refill it when it is spent.
My rent is paid every three months. How do I record it?
Record it on the day you pay it, so your cash records stay right. When you compare months, remember that the month with the payment carries three months of rent. Some owners note one third of it against each month in their own comparison so that every month looks alike; either way is fine as long as you do it the same way every time.
Is the tea and food I take for my own family an expense?
No. Goods or money taken for the household are drawings, not shop expenses. Record them separately, so the shop's costs show what it really costs to run and your own withdrawals are visible as what they are.
How long should I keep expense slips?
Keep the month's slips together and at least until you have checked that month's totals. For bills that matter for tax or official records, check what applies where you trade or ask your accountant how long they must be kept.
What if I forgot to record expenses for a whole week?
Do not guess the whole week in one line. Go through your phone payments, any slips you kept and the days you remember, and record what you can find on the days it happened. Then add one line for the part you cannot account for, under "Other", with a note. Next month the daily habit will make this unnecessary.
In Saleva, the Expenses screen records each payment with a category as it happens, and the amounts flow straight into net profit. The Reports screen then shows revenue, gross profit, expenses and net profit side by side for any period you choose, and can be shared as a PDF for your own records or your accountant. The money and reports guide shows where each of these is.
Try this in Saleva
Saleva is a free Android point-of-sale app for small shops: selling, stock, customer dues, staff and an online shop page. Selling works with no internet at all.