If your cash flow feels tight no matter how hard you hustle, overhead might be the silent thief in your business.
Too many business owners don’t actually know what their overhead is, where it’s going, or how it’s growing month after month. But when you don’t track overhead intentionally, it grows to a place where it eats your profit.
What is Overhead?
Overhead costs are your fixed and variable expenses that keep your business running, but do not generate your service or product revenue. They don’t directly generate income, but they’re essential in keeping your business running efficiently.
Think:
- 🧾 Wages (for non-billable team members)
- 🏢 Rent and utilities
- 💻 Software and subscriptions
- 📈 Marketing retainers or ads
- 📦 Insurance, admin support, and memberships
Fixed vs. Variable Overhead
📌 Fixed = stays the same each month (like rent or salaried team members)
📌 Variable = changes based on use or season (like utilities, contractor hours, or ad spend)
Understanding the difference helps you plan for what’s predictable and prepare for what might fluctuate.
Know Your Numbers
I recommend pulling three key QuickBooks reports:
- Profit & Loss by Month
- Profit & Loss Year Over Year Comparison
- Profit & Loss by Income % Comparison
These give you a bird’s-eye view of what you’re spending and how it’s trending. You’ll see if you’re slowly bleeding cash.
If you notice a steady climb in overhead without a proportional rise in revenue, it’s time to reassess.
COGS vs. Overhead (And Why It Matters)
Cost of Goods Sold (COGS) versus overhead is so confusing. COGS are the direct costs tied to producing your product or delivering your service, like materials or hourly labor.
Overhead is everything else required to run the business.
Why does it matter? Because mixing the two throws off your margin calculations, profit forecasting, and strategic planning.
Your Overhead Benchmark: 35%
I really don’t like throwing out budgeting percentages, but if you backed me into a corner and made me answer: overhead should be no more than 35% of your total business expenses. If it’s climbing higher than that, your business is carrying unnecessary weight and possibly sabotaging your growth.
There are natural ebbs and flows to growth, where your overhead will be higher due to internal changes you are making. The key will be to have a fully funded SAVINGS account to cover any potential times that you are negative cash flow or sales are not generating like you thought they would.
Final Thoughts from Your Favorite Bookkeeper 🧡
When you get clear on what is included in your overhead, you get clarity on what items are a need versus a want.
It’s not about cutting costs to the bone, it’s about aligning your budget with your income strategy. Knowing your numbers means you can:
- Budget for growth,
- Hire with clarity,
- And avoid the panic when sales dip.
At My CFO, we help business owners stop winging it and start forecasting their future with confidence. Need help breaking down your P&L or figuring out if your overhead is bloated? That’s what we do every day when we handle your bookkeeping. We learn your business so well that we know when you are duplicating subscriptions, when your advertising isn’t paying off, or when you might have too many people on payroll.
💸 Because at the end of the day, cash flow isn’t luck, it’s strategy.
