TLDR: SG&A stands for selling, general, and administrative expenses, the combined cost of selling a product and running the company behind it. It sits below gross profit on the income statement, separate from cost of goods sold. The formula is selling expenses plus general and administrative expenses, and the figure is usually judged as a percentage of revenue rather than in absolute dollars. SG&A among the largest North American companies reached a median of 16.2% of revenue in 2026, according to The Hackett Group.
SG&A is every operating cost a business incurs that is not a direct cost of producing what it sells. Sales commissions, office rent, the finance team's salaries, business insurance, and the software the whole company uses all land here.
The formula:
SG&A = Selling expenses + General and administrative expenses
The letters unpack in a way that hides a real distinction. The S covers the cost of winning revenue. The G and the A cover the cost of existing at all. Two companies with identical SG&A totals can be running completely different businesses, one pouring money into a sales force and the other carrying heavy administrative overhead, which is why analysts rarely look at the combined number without breaking it apart first.
Selling expenses are the costs of generating revenue, whether or not a sale closes.
General and administrative expenses are the costs of keeping the company running, regardless of sales volume.
If you want the detail on just this half of the line, see our guide to general and administrative expenses.
These four terms get used loosely in conversation and precisely in accounting, which is where most of the confusion starts.
| Term | What it covers | Where it sits |
|---|---|---|
| COGS | Direct costs of producing the product or delivering the service: materials, production labour, and manufacturing overhead | Above gross profit |
| G&A | The administrative half of SG&A: rent, admin salaries, insurance, and professional fees | Inside SG&A |
| SG&A | Selling expenses plus G&A, reported as one line or split into two | Below gross profit |
| Operating expenses | SG&A plus other operating lines such as R&D and depreciation | Below gross profit |
Two rules settle most classification arguments. First, if the cost would disappear when production stopped, it is probably COGS. Second, if it would continue whether or not anything sold that month, it is probably G&A.
SG&A appears below gross profit and above operating income:
Revenue
Less: Cost of goods sold
= Gross profit
Less: SG&A
Less: Research and development
Less: Depreciation and amortization
= Operating income
Research and development is normally reported on its own line rather than folded into SG&A, because investors want to see it separately. Depreciation is handled inconsistently. Some companies report it separately, others distribute it into SG&A and COGS, which is one reason SG&A comparisons between two companies in the same industry are less clean than they look.
Add every selling cost and every general and administrative cost for the period. Nothing more complicated than that happens mathematically. The difficulty is in classification, not arithmetic.
Take a 140-person specialty contractor closing its second quarter, running its existing commercial card program through ExpensePoint. Field labour, materials, and equipment on the job are costed to projects, so they sit in COGS. Everything below is SG&A.
SG&A for the quarter is $669,000. Against quarterly revenue of $4.2 million, that is an SG&A ratio of 15.9%.
Three systems produced that list. Payroll supplied the two salary lines and commissions. Accounts payable supplied rent, professional fees, insurance, and most of the software and event invoices. ExpensePoint supplied the rest: the $18,500 of sales travel and client meals in full, plus roughly $21,000 of card spend sitting inside the events and software lines.
That last group is where the classification risk concentrates. Payroll and rent arrive pre-coded from one system on a fixed schedule and are almost never wrong. The $39,500 arrives from 140 people, each deciding in the moment whether a dinner with a client is a selling expense or an administrative one, and each of those decisions flows straight into the statement unless someone catches it at close. Under 6% of the line carries nearly all of the error, and it is the only part ExpensePoint governs: categories are applied at submission from policy rules and the card feed rather than being reassigned during close.
The SG&A ratio is SG&A divided by revenue, expressed as a percentage, and it answers a question the raw dollar figure cannot: how much overhead the business carries for every dollar it earns.
Rising revenue with a flat SG&A ratio means overhead is scaling with the business, which is usually fine. Rising revenue with a rising ratio means the cost of running the company is growing faster than the company, which is the pattern that triggers cost reviews. Falling revenue with a flat dollar figure is the most uncomfortable version, because fixed overhead does not shrink on its own.
Benchmarks vary widely by industry, so compare against peers rather than against a universal target. A software company with a large sales organization and a manufacturer with a lean back office can both be healthy at very different ratios.
In practice, finance teams do not struggle to add two numbers together, they struggle to trust the inputs.
None of these are accounting errors in the technical sense. They are data quality problems, and they are why two consecutive quarters of SG&A can move several points without any underlying change in spending behaviour.
ExpensePoint sits at the point where SG&A data is created, when an employee submits a claim or a card transaction posts. Receipt capture and policy rules applied at submission mean expenses arrive coded correctly rather than being reclassified during close. Because ExpensePoint is card-agnostic, transactions from the corporate cards you already hold at Visa, Mastercard, and American Express issuers flow into the same categorization rules as out-of-pocket claims, so selling and administrative costs are separated consistently across both.
Exports feed NetSuite, QuickBooks, Sage Intacct, Xero, Microsoft Dynamics 365, and SAP Business One, so the categories set at entry are the ones that reach the income statement.