SG&A

What is SG&A?

There are many costs of running a business—from hiring employees to paying annual software fees. SG&A (selling, general, and administrative) expenses represent these costs, covering many different business items and functional areas:

Rent and utilities for office space
Sales and marketing costs
Office supplies
Business insurance
Software
Salaries for positions other than those directly related to the production of goods and services

SG&A is one of the main categories, along with cost of goods sold (COGS), on a business’ income statement. The selling portion of SG&A generally involves indirect costs related to selling a product or service (e.g., advertising), whereas direct costs (e.g., packaging and shipping) are listed under COGS. SG&A, COGS, and other non-operating expenses like legal fees impact a business’s bottom line, as they are deducted from the total sales revenue to reach the business’s operating income, or profit.

FAQs

What are SG&A expenses?

SG&A expenses include all the costs involved with day-to-day operations of a business, like rent and utilities, marketing expenses, advertising expenses, IT and software, office supplies, sales commissions, and many salaries.

What’s the difference between COGS and SG&A?

COGS, or cost of goods sold, are all the expenses involved in producing goods or services, including direct selling expenses like shipping costs. SG&A includes indirect selling expenses, general expenses, and administrative expenses that are involved in operating a business—aside from the production of goods or services. Both COGS and SG&A are line items on a company’s income statement.

Does SG&A include salaries?

Yes, SG&A includes salaries for most positions other than those involved in the production or manufacturing of goods and services; those salaries would be included under COGS. Businesses typically include executive salaries as well as those of sales and marketing teams, human resources, accounting, and other administrative staff.

How can you reduce SG&A expenses?

Reducing SG&A expenses requires a multipronged business strategy and continual monitoring of overhead expenses to understand where to optimize without sacrificing quality. To cut overhead costs, companies often start by identifying areas of waste, such as unused or underused software or processes that could be automated. Additionally, they can try to find better deals on necessary items, like rent, software, and supplies.