To calculate G&A expenses, add up every cost that keeps your corporate office running — executive pay, administrative wages, rent, utilities, insurance, professional fees, office supplies, and depreciation on office assets — for a single reporting period, then divide that total by revenue for the same period to get your G&A ratio. Most businesses land somewhere between 10% and 25%, though the range varies sharply by industry. The work that matters happens before the arithmetic: deciding which costs actually belong in the total, and pulling clean numbers from your books.
What Counts as a G&A Expense
General and administrative expenses are the costs of running the business itself, separate from making or selling a product. Under standard accounting principles they are period costs, meaning they hit the income statement in the period incurred rather than being folded into inventory. That treatment determines where the numbers land on your financial statements and how the IRS expects you to report them.
The line items you should be totaling:
- Executive compensation, including salaries and benefits for your CEO, CFO, and other corporate officers.
- Administrative staff wages for human resources, accounting, legal, and other back-office employees.
- Rent and utilities on corporate office space — electricity, heating, water, telecommunications.
- Insurance premiums for general liability, property coverage, and directors-and-officers policies.
- Legal and accounting fees, both retainers and hourly charges.
- Office supplies and administrative software subscriptions.
- Depreciation on office furniture, equipment, and corporate buildings not used in production.
What to Leave Out
Misclassification is where the ratio breaks. The biggest confusion sits at the border between G&A and selling expenses. Sales team salaries, rent on a dedicated sales office, advertising, and trade show costs all belong under selling expenses, not G&A. If someone’s job is generating revenue rather than supporting the organization’s infrastructure, their compensation goes elsewhere.
Cost of goods sold captures direct production inputs like raw materials and factory labor. Research and development gets its own category. A useful test: if the expense disappeared tomorrow and you still had a functioning corporate office, it probably isn’t G&A. If the corporate office couldn’t operate without it, it probably is.
Pulling the Numbers Together
Accuracy depends on clean data. Start with your general ledger, which records every financial transaction and should already tag expenses by department or category. If you use accounting software like QuickBooks or Xero, pull reports filtered to management and administrative accounts. Cross-check the output against your trial balance so nothing was miscoded.
For payroll, you need gross wages, employer-paid payroll taxes, and benefits costs for every non-production employee. Lease agreements give you fixed occupancy costs. Utility invoices, insurance declarations, and service contracts fill in the recurring monthly charges. Verify every figure against bank statements before you start adding. A single misclassified payment can cascade through the entire calculation.
Pick a Consistent Reporting Period
Most businesses calculate G&A quarterly and annually. The IRS recognizes both calendar years and fiscal years ending on the last day of any other month.1Internal Revenue Service. Tax Years Whatever you choose, every line item must fall within it. A spreadsheet with one row per category prevents double-counting and makes outliers easy to spot.
Cash Basis or Accrual Basis
Your accounting method changes when expenses enter the calculation. Under cash-basis accounting, you record a G&A expense when you pay the bill. Under accrual, you record it when the obligation is incurred, regardless of when cash moves. A December rent payment that clears your account in January lands in December under accrual and January under cash basis. Stay consistent across periods, or the ratio comparisons will mean nothing.
The Formula and a Worked Example
Once you have the total, the arithmetic is straightforward:
G&A Ratio = (Total G&A Expenses ÷ Total Revenue) × 100
Use total revenue from the top line of your income statement for the same period. If your business brought in $800,000 in revenue last year and spent $96,000 on G&A, the calculation is $96,000 ÷ $800,000 = 0.12, or 12%. Twelve cents of every dollar earned went toward keeping the lights on at headquarters rather than producing goods, serving customers, or generating profit.
Consistency matters more than precision. Use total revenue rather than net income or gross profit, and stick with that denominator every time you run the numbers. Switching between gross revenue and net sales after returns will make period-to-period comparisons meaningless.
Reading Your Ratio Against Benchmarks
A G&A ratio by itself is just a number. It becomes useful compared against something — your own prior periods, competitors, or industry averages. A ratio climbing quarter over quarter while revenue stays flat means overhead is outgrowing the business. A ratio that drops as revenue grows suggests you’re scaling efficiently.
NYU Stern’s January 2026 industry analysis shows how sharply benchmarks vary by sector:
- Total market excluding financials: SG&A runs about 14% of sales.
- Machinery manufacturing: roughly 20%.
- General retail: around 21%.
- Software: about 24%, reflecting heavy investment in administrative infrastructure to support subscription models.
- Semiconductors: just over 6%, driven by enormous revenue per employee.
These figures represent SG&A — selling, general, and administrative combined — not pure G&A. Your G&A-only ratio will be lower because it excludes sales and marketing. Still, these give you a ceiling: if your G&A alone exceeds your industry’s total SG&A average, something is probably wrong.
For software-as-a-service companies specifically, G&A as a standalone percentage of revenue tends to run 10% to 20% for businesses in the $5 to $25 million revenue range, dropping to 8% to 14% as revenue scales past $25 million. The finance function alone typically accounts for 1.5% to 3% of revenue at the growth stage.
Where G&A Lands on Your Tax Return
Most G&A expenses are fully deductible in the year incurred under Section 162 of the Internal Revenue Code, which allows a deduction for all ordinary and necessary expenses of carrying on a business.3Office of the Law Revision Counsel. 26 U.S. Code 162 – Trade or Business Expenses “Ordinary” means common in your industry; “necessary” means helpful and appropriate for the business. Executive salaries, rent, utilities, insurance, and professional fees all clear this bar easily.
The reporting lines depend on your business structure. Corporations use Form 1120, where G&A spreads across several lines: officer compensation on Line 12, salaries and wages on Line 13, rents on Line 16, taxes and licenses on Line 17, and remaining items like utilities and professional fees on Line 26.4Internal Revenue Service. Instructions for Form 1120 (2025)
Sole proprietors file Schedule C with Form 1040. Administrative expenses appear on Line 15 for insurance, Line 17 for legal and professional services, Line 18 for office expenses, Line 20b for office rent, and Line 25 for utilities.5Internal Revenue Service. Instructions for Schedule C (Form 1040) (2025)
Partnerships report on Form 1065 using a similar layout: salaries on Line 9, rent on Line 13, and taxes and licenses on Line 14.6Internal Revenue Service. Instructions for Form 1065 (2025) Whatever your entity type, expenses that don’t fit a named line go on the catchall “Other Deductions” line with an attached itemized statement.
One boundary to know: if you produce tangible property or acquire property for resale, Section 263A’s uniform capitalization rules require a share of administrative overhead to be added to inventory cost rather than deducted immediately.7Office of the Law Revision Counsel. 26 U.S. Code 263A – Capitalization and Inclusion in Inventory Costs of Certain Expenses Small businesses with average annual gross receipts of $31 million or less are generally exempt.8Internal Revenue Service. Questions and Answers About the Limitation on the Deduction for Business Interest Expense
Bringing the Ratio Down
You can improve the ratio from either side of the fraction: cut overhead or grow revenue faster than costs rise. In practice, most businesses have more immediate control over the numerator. The levers that actually move the number:
- Audit recurring contracts. Insurance premiums, software subscriptions, and service agreements tend to auto-renew at higher rates. Review every recurring charge annually and either renegotiate or switch providers. Lowest-effort, highest-return move most businesses can make.
- Consolidate software. Administrative teams often run overlapping tools for project management, communication, and document storage. Eliminating redundancies cuts both licensing costs and the training time to support them.
- Outsource selectively. Payroll processing, bookkeeping, and basic legal compliance can often be handled by outside specialists at a lower total cost than a full-time employee with benefits.
- Automate repetitive tasks. Invoice processing, expense approvals, and routine reporting are prime candidates. Implementation costs usually pay back within a year through reduced labor hours.
- Renegotiate your lease. If your workforce has shifted to hybrid or remote, you may be paying for space that sits half-empty. Downsizing or subleasing can significantly reduce one of the largest G&A line items.
- Redesign workflows before adding headcount. When administrative staff feel overloaded, the instinct is to hire. Inefficient processes, not insufficient people, are often the real problem. Map the workflow first.
Research across industries shows that competitors in the same sector can differ by 4 to 8 percentage points in G&A spending as a share of revenue. Companies that systematically attack overhead rather than trimming it in response to a crisis tend to sustain those improvements longer. The ones that wait until performance is already deteriorating usually end up making cuts that hurt the organization’s ability to function.