Definition and Nature of Utility Expenses

Utility expenses are the basic costs for essential utility services necessary for operating an organization, including electricity, water, gas, telephone, internet, and cleaning services. They are characterized by their monthly recurring nature and are classified as relatively fixed operating expenses, despite being affected by activity levels and seasonal factors. They are considered necessary costs that cannot be avoided for business continuity, and require effective management to control costs and improve operational efficiency.

Examples

• Electricity bills
• Water and sewage fees
• Natural gas bills
• Telephone and internet services
• Security and guard services
• Elevator maintenance
• Cleaning services
• Alarm and surveillance systems

Where Utility Expenses Appear in Financial Statements

Utility expenses appear in the income statement under operating expenses and reduce the organization's operating profit. In the cash flow statement, they are recorded as cash outflows under operating activities when paid. In the balance sheet, they may appear as prepaid expenses under current assets if paid in advance, or as accrued expenses under current liabilities if not yet paid.

Control and Monitoring of These Expenses

Controlling utility expenses requires periodic monitoring of consumption and comparing bills to planned budgets, while implementing conservation measures such as using energy-efficient technologies. Control tools include smart meters, energy management systems, and regular equipment maintenance, in addition to training employees on optimal usage and negotiating with service providers to obtain the best prices.