Decoding G&A Meaning: A Simple Guide to Navigating General & Administrative Expenses

G&A expenses may not contribute to production, but they're still critical for business. With the right management system, they can help hone overall operations.

What Does G&A Mean?

"G&A" refers to general and administrative expenses. Think of these costs as the backbone of a company's operations. They aren't directly tied to producing goods or services but keep the business running smoothly. They can include:

• Executive Salaries
• Human Resources Staff
• Office Rent
• Utilities
• Legal and Accounting Fees
• Office Supplies
• Electronics
• Insurance
• Service and Tool Subscriptions
• Office Furniture

G&A expenses are usually fixed, so company sales don’t affect them. They remain constant whether your business is profitable or not.

Why Should You Care About G&A?

G&A expenses are vital to business operations even if they don't fund production. Consequently, your business can grow more efficient and profitable if you oversee them correctly. It’s like tuning an engine; the better you manage your G&A, the smoother your company runs, and the more you can focus on growth.

“While general and administrative expenses are not directly related to profit, they are essential to your company’s operations,” Brad Nakase writes for Nakase Wade. “They can help you attract the best employees, increase your bottom line, improve efficiency, and boost cash flow. Without G&A expenses, you would not be able to run your company.”

How Can G&A Management Make a Companywide Impact?

As an example, let's consider a small, fictional graphic design firm, Creative Minds. Imagine the leadership noticed that G&A was consuming a significant portion of the company budget, particularly office space rent and utilities in a high-cost area.

Consequently, they shifted to a remote-first model and reduced their rent and utility costs. They also widened their talent pool since they no longer had to hire in the company’s immediate geographic area. The change also boosted employee satisfaction and productivity, showing how G&A management can impact more than the budget.

How are G&A Expenses Different from Overhead Expenses?

The main difference between G&A expenses and overhead lies in their scope and application. G&A expenses are included in overhead costs. They focus specifically on a business’s administrative aspects.

In contrast, overhead expenses include all costs on the company's income statement except for direct labor, materials, and fees. Overhead expenses involve a more comprehensive range of costs, including G&A and production-related expenses.

Tips for Managing G&A Expenses

Unfortunately, many companies are facing a G&A cost crisis. McKinsey & Company reports that, on average, these expenses have risen 15.4% since 2015, while revenue has only grown 6%. To stay profitable, businesses must reign in their spending. Here are some tips for keeping your G&A in check:

1. Embrace Technology

Automate when you can. Use software for accounting, customer relationship management (CRM), and other administrative tasks. This reduces the need for manual work (and the risk of errors), saving money in the long run.

McKinsey & Company says automating procurement, in particular, can impact G&A expenses because of the process’s high spend baseline.

“Disruptions in specific industries allow companies to identify and capture new sources of value with digital tools and automate repetitive processes in procurement, ultimately freeing up buyers to work on more strategic tasks,” McKinsey explains.

The research company also says digital procurement can garner over 7% additional value by managing leakage and finding new spend reduction opportunities. Additionally, automation is crucial for cutting expenses in other areas. In fact, 64% of data-collection tasks and 69% of data-processing duties could be automated with current technology.

A NetSuite ERP automates and streamlines many processes covered by G&A expenses, including expense tracking and reporting. It also improves the procurement process by automatically linking procurement transactions with goods receipts, billing documents, and vendor records. Consequently, it saves your company money and frees staff time to focus on business strategy.

You can learn more about how NetSuite boosts efficiency and cuts expenses during your free consultation with SuiteDynamics experts.

2. Monitor Expenses

Review G&A expenses regularly for cost issues. For instance, if your office supply costs have doubled, discover why and explore ways to reduce them.

ERP software can help you accomplish this task quickly. It unifies all your company systems on a single database and allows complete visibility into every aspect of business, including G&A expenses. A cloud-based system also allows executives to access important information anywhere and anytime.

3. Negotiate Everything

Think of initial pricing as a starting point for negotiations when purchasing an office lease, internet service provider, and other business requirements. Even small savings add up over time.

4. Outsource Wisely

It might not make sense for a small or medium-sized business to employ a full-time lawyer or accountant. Outsourcing legal and accounting tasks can be cost-effective, so you get the expertise you need without paying a full-time salary.

In fact, many companies outsource their IT needs. According to the 2022 Deloitte Global Outsourcing Survey, 76% of surveyed executives said they outsource digital tasks like cybersecurity, app and software development, infrastructure services, and data analysis.

5. Go Green

Conserving energy can significantly decrease utility expenses. For example, your company could switch to LED lighting or encourage remote work.

Global Workplace Analytics estimates a typical employer could save a yearly average of $11,000 per employee who telecommutes half-time. These savings result from lower real estate costs, boosted productivity, fewer off days, reduced turnover, and better disaster preparedness.

Moving from an on-premises ERP to a cloud system will also eliminate the cost of server room electricity. According to NetSuite, its ERP platform saves the company’s 37,000 customers almost 600 million kilowatt-hours of energy annually. That’s roughly the amount consumed by 56,000 homes.

We understand how vital solid financial practices are to a successful company. We want to help tighten up G&A management at your business so you can invest in other areas that drive profitability. Schedule a free consultation with SuiteDynamics experts to explore how a NetSuite ERP can increase efficiency and cut expenses.

How to Use G&A to Fuel Growth

If your company’s operation were a theatre performance, G&A management would be part of the backstage crew. You wouldn’t see its direct contribution, but the show couldn’t go on without it.   

Therefore, invest in G&A wisely. Keep an eye on costs, negotiate the best possible rates, outsource smartly, adopt green practices, and invest in a robust software system like NetSuite that offers a competitive edge. You’ll turn G&A management from a daunting task into a strategic advantage.

Schedule a free consultation with SuiteDynamics experts to talk about how NetSuite can help your company maximize G&A and become a better, more profitable business.

We pull information from NetSuite material, SuiteDynamics experts, and other reliable sources to compose our blog posts and educational pieces. We ensure they are as accurate as possible at the time of writing. However, software evolves quickly, and although we work to maintain these posts, some details may fall out of date. Contact SuiteDynamics experts for the latest information on NetSuite ERP systems.

Part of this text was generated using GPT-3, OpenAI’s large-scale language-generation model. After generating the draft language, our team edited, revised, and fact-checked it to ensure readability and accuracy. SuiteDynamics is ultimately responsible for the content of this blog post.