How to determine if an expense is justifiable

Determining if an expense is justifiable depends on many things. It depends on how you will benefit from the expense. Will the item or thing that you bought help you and anyone else in anyway. People have justifiable expenses everyday. Buying food for your family, getting diapers for the baby, getting your car serviced, getting clothing that is need, all of these are expenses that will benefit someone. In a business you have to determine if expenses are really needed. Let's go over some examples on how to justify your expenses. And then let's go over justifiable expenses.

Business budget planners will not approve an expense unless it is really needed. First you will need to present your problem. Once you have your problem you will need to find a solution. Research the most logical way to solve your problem. Present the benefits of your solution; make the budget planners think that if they approve the budget that they are really helping. Give the budget team a ball park cost, ensure them that your solution is the most cost effective way to go.

A) You have a problem with your computer security system, files are being stolen and putting your company in jeopardy. You want to install some programs into you computer to help prevent hackers from stealing your important business information, but you have no computer software experience. Your solution would be to hire a software technician to install all the security you need on to your computer. Research the costs to hire a technician and make sure you get the best rate. This would be considered a justifiable expense. Your company is benefiting from the cost, by getting security protection and no more files will be stolen.
B) You just purchased a new location for your expanding business. The inside and outside are decent but not the best that they could be, considering the type of business you run. You need more parking and need to remodel the inside and outside of the building. You solution would be to hire a contractor to help you improve your new business location. Use a contractor that you used before, or get referrals from other business owners. Costs for contractors fluctuate so the one you used before might not give you the best cost. An remodel for you business is justifiable because the new look will help attract more customers.
C) You have several employees, and do not want to loose any of them. One of your employees comes up to you to discuss a possible pay raise. He says "hey I have been here for quite a while and I think that I am worth more to you then what you are paying me right now". Being in your type of business you know that it is very hard to train new people. It would cost more money to train a new person then to give your employee a raise, so you agree. This expense would benefit you and your business because you do not have to train a new person and you are keeping a good experienced employee on your team.

So when determining if an expense is justifiable you will need to look at several different things. Identify your problem, will your business suffer if the problem isn't confronted and fixed? Come up with a solution to you problem, find ways to get the best possible cost to solve the problem. Think about the benefits that the expense will bring, will you benefit more or suffer more from your solution. Remember if an expense is justifiable others along with yourself will benefit from it, and always choose your expenses wisely.