Marketing is a classic example of something that is discretionary but not optional. In fact, many of these costs really do need to be paid if you want to have any kind of long-term success.īut since the amounts can fluctuate hugely from month to month, and because you can choose not to invest in these areas for months or even years at a time, they’re definitely discretionary. Once again, the most important thing to remember is that discretionary doesn’t mean that every business owner considers these optional. We’ll try to be as comprehensive as possible, but of course there will be some costs missing. There’s no better way to really spell out what’s considered a discretionary expense than with a nice long list. So what do discretionary costs look like, by contrast? Discretionary expenses examples You can’t choose not to have these things this month. Necessary hardware (for instance, point-of-sale machines for stores).Software that directly powers your business.Inventory (especially for retail and other businesses that sell physical goods).Utility bills (including Internet costs).Debts repayments (including loans and mortgages).But first it might help to see some costs that are not optional. We’re about to look at a detailed list of discretionary expenses. And if you don’t, there’s a very real chance that you’ll be hit with court cases, fines, or have to shut down altogether. You are legally obliged to pay these each month. On the other hand, costs like rent, salaries, and certain insurances are essential. It might be bad for business if you don’t print flyers or update your website, but the business will continue. In any given month you could not pay a certain cost and there wouldn’t be any legal ramifications. So to be clear, discretionary expenses are optional. Discretionary spending vs essential expenses It may be practically vital if you want your brand to be discovered and to compete in your market, but it’s not strictly speaking essential. For example, even though most companies know they need to advertise, whether or not they end up paying for advertising is at the discretion of the Chief Marketing Officer or CEO. We’ll look at some examples shortly, and many of these will feel completely necessary.īut this distinction should be looked at literally. We're going to look at the key differences between discretionary and essential expenses, list a whole range of different discretionary costs, and talk about why managing these costs is both more important and more difficult than it ought to be.īut first, we'd better start with a clear definition.ĭiscretionary spending applies to costs and expenses that are non-essential.Ī lot of these costs don’t feel “non-essential” (excuse the double negative). This article goes into more detail than is probably necessary to make sure that you never have this issue again. The term "discretionary spending" is common in business, but it's not always clear to all what it means.
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