Discretionary expenses examples for modern businesses

What counts as discretionary spending, and how can finance teams control it without cutting into growth? From marketing and travel to software subscriptions and team perks, this guide explains how to distinguish flexible costs from essential expenses and manage them with greater visibility and control.

Key takeaways

• Discretionary spending covers costs you can change or postpone at short notice.

• The same cost can move between discretionary and committed depending on the contract you have signed and the time horizon you are considering.

• Marketing, training and R&D, software subscriptions, travel, perks, and office upgrades are the categories most finance teams treat as discretionary.

• Blanket percentage cuts can remove growth spend alongside waste, so visibility by category matters more than the size of the cut.

• Controls that act before money moves reduce the retrospective policing that discretionary spend otherwise creates for finance.

What is discretionary spending?

To define discretionary spending, focus on the costs your finance team can still change. It is the money you choose to spend and could adjust or postpone at short notice without stopping operations.

Examples include:

• Marketing campaigns.

• Training.

• Travel.

• Software subscriptions.

• Team perks.

• Office upgrades.

This definition comes from management accounting, not from a reporting standard. Neither IFRS nor FRS 102 has a line called “discretionary expenses”. IAS 1 asks you to present expenses by nature or by function, and discretion is not one of the options.

The consequence for your finance team is that you draw the line yourselves. This is why the same cost can be discretionary in one company and committed in another.

This is general guidance for UK finance teams, not tax advice. VAT treatment depends on your specific circumstances, so consult a qualified tax adviser before making decisions based on the rules covered here.

What you will learn in this guide

• How finance teams separate discretionary costs from committed ones.

• Six discretionary categories and the decisions that shape them.

• Why discretionary budgets swing hardest when conditions tighten.

• What a spend management system needs to keep discretionary costs under control.

Discretionary spending vs essential expenses

Essential expenses are costs you have already locked in through a contract or statutory obligation. They also include costs you need to keep the business operating.

Discretionary expenses are the costs you still have a decision about.

The Association of Chartered Certified Accountants describes committed costs as costs:

“That would be incurred in the future but they cannot be avoided because the company has already committed to them through another decision which has been made.”

The same organisation’s budgeting guidance lists “research and development of new products” as a discretionary cost and contrasts it with heating and lighting, which:

“Will have to be paid, irrespective of the budget amount allocated to them.”

That is the practical test: if the bill arrives whatever you decide this quarter, it is committed.

Time horizon and contract status do most of the work in moving a cost across the line.

For example:

• Travel is deferrable this month but tends to recover.

• A 12-month software contract is committed until renewal.

• A signed media placement or agency retainer stops being discretionary for the duration of the contract.

Control adds another layer. The ACCA treats marketing fees agreed by a head-office director as traceable to a division but not controllable by its manager. That distinction matters when judging a budget owner on spending they did not approve.

Examples of essential expenses

The costs below are committed for most UK and European businesses, with borderline cases flagged where classification depends on your contracts.

Two rows deserve particular care.

Utilities split in two:

• The standing charge is committed.

• The consumption element rises and falls with activity.

Software follows a similar pattern. The contracted core is committed, while finance can review additional seats, optional tools, and duplicate subscriptions.

Check the statutory thresholds and rates that apply to your entity against current GOV.UK guidance, because they change and depend on your circumstances.

Discretionary expenses: examples

The six categories below are the ones UK and European finance teams most often treat as discretionary.

Marketing

Marketing is often one of the largest discretionary lines, and accounting rules push it through the P&L in the period you spend it.

IAS 38 requires businesses to recognise:

“Expenditure on advertising and promotional activities, including mail order catalogues”

as an expense when incurred, so businesses cannot park a campaign on the balance sheet.

Expense recognition affects financial reporting, but it does not make signed commitments adjustable. Finance can change future campaign spending only while the business remains free to alter or postpone it.

Typical marketing costs in this category include:

• Advertising and paid media across search, social, and display channels.

• Events and conference sponsorships, including hospitality.

• Public relations retainers and media outreach.

• Content, design, and brand work from agencies or freelancers.

• Market research and customer surveys.

Timing matters within the category. Budgeting for a single marketing event is discretionary until the business pays the venue deposit. After that, the committed portion sits alongside rent for the length of the contract.

Investments

Investments, in the discretionary sense, are expenditures on future capacity. They include:

• Research and development.

• Employee training.

• Equipment upgrades.

• New tools and technology.

You set the timing and the amount, which is what makes them discretionary in the budget.

The budgeting label and accounting treatment are different questions.

Under the applicable reporting framework:

• Businesses generally expense research costs as they incur them.

• IAS 38 requires businesses to capitalise development costs once they meet six recognition criteria.

• FRS 102 offers a policy choice, subject to current requirements.

• Training is always expensed because staff can leave and the business retains no control over the benefit.

• Qualifying equipment is capitalised and depreciated.

Deferring a capitalised upgrade protects cash but may barely move this year’s operating profit. Cutting training or research reduces expense immediately, so the two behave differently under pressure.

Training is often where cuts land because reducing it lowers expenses immediately. That short-term result needs to be weighed against the capability the business expected the training to create.

Company subscriptions

Software subscriptions are the discretionary category most likely to grow without anyone consciously deciding that they should. Each renewal may be small and automatic, but the total can become significant across many cardholders.

Waste often follows software sprawl. In SAP LeanIX’s 2025 IT Cost Survey of 225 enterprise architecture managers:

• Nearly half said they were overpaying for SaaS licences.

• 60% pointed to redundant applications.

A broad software portfolio therefore deserves a duplication review rather than an assumption that every subscription serves a distinct need.

Within the category:

• The contracted core is committed until renewal.

• Additional seats remain discretionary.

• Duplicate tools remain discretionary.

• Optional add-ons remain discretionary.

Productivity tools like Notion are a good example. The workspace may be essential to the team that uses it, but a separate instance for another team may be a review item.

Giving each of your company subscriptions its own virtual card and renewal date turns a month-end surprise into a cost you can see coming.

Travel

Travel is the classic deferrable expense, but each trip becomes committed as soon as the traveller books it.

Once the business buys a non-refundable fare, that fare becomes committed even though the original decision to travel was discretionary.

That is why finance teams need to apply policy at the booking point rather than at the expense claim stage. By then, the only remaining decision may be whether to reimburse the employee.

HM Revenue & Customs publishes benchmark scale rates for tax-free subsistence. Confirm the current rates and conditions against HMRC guidance before building them into your policy.

Operationally, travel spending can produce missing receipts because employees generate them away from their desks and may pay in several currencies.

A clear corporate travel management process should define:

• Who can book each travel class.

• How far ahead employees should book.

• Which card employees should use.

• When a trip must be approved.

Team perks

Team perks are the benefits you offer beyond statutory pay.

Examples include:

• Snacks and drinks.

• Social events.

• Private medical insurance.

• Wellbeing budgets.

• Learning stipends.

• Home-office equipment.

Employer pension contributions, National Insurance, and statutory leave sit on the committed side. Everything above that line is a choice.

The most common perks are modest, but the total still depends on how many employees can claim them and how often. A recurring allowance behaves differently from a one-off team event, even when both sit under the same budget heading.

The finance challenge with team perks comes from the volume of small card payments and reimbursement claims that office managers and team leads submit.

Each transaction needs supporting evidence before an approver checks it and finance assigns the general ledger code.

Office improvements

Office improvements cover:

• Fit-outs.

• Furniture.

• Audio-visual equipment.

• Coworking memberships.

• Home-working allowances.

You choose the timing, which makes these costs discretionary in the budget. However, businesses capitalise and depreciate many of these costs instead of expensing them immediately.

Businesses generally:

• Expense repairs and short-term relocation or coworking costs as they incur them.

• Record a permanent fit-out as property, plant, and equipment when it meets the recognition criteria.

The amounts involved can make a fit-out a separate capital decision rather than an ordinary office-expense line.

Finance therefore needs to distinguish between:

• The cash commitment.

• The timing of depreciation in the accounts.

Teams may use modern offices far below their planned capacity. A fit-out sized for a full team five days a week may overfund space that remains underused, particularly at the end of the week.

Home-working allowances are the smaller counterpart. HMRC sets a tax-free weekly amount for additional household costs, so check the current figure for your setup before fixing the policy.

Why does discretionary spend matter?

Discretionary spend matters because it is where cost control lands first, and where a blunt cut can do the most damage.

Travel, training, and marketing may all be adjustable, but they do not create the same value or carry the same operational consequences.

Finance leaders should treat a proposed cut as a classification decision, not simply as a percentage target. If discretionary actuals live in card statements and last year’s budget file, finance leaders set the cut based on sentiment rather than on which lines are growing.

Category-level actuals, kept current throughout the month, let you protect valuable marketing activity while identifying waste such as duplicate software.

Digital technology is a notable exception. Boards may protect software and AI investment even when it remains discretionary on paper. As a result, the subscription line can continue growing unless someone reviews it deliberately.

For a finance operations manager, the practical weight of discretionary spend sits in the workflow.

Rent may be one invoice per month. Travel, perks, subscriptions, and marketing can create hundreds of card transactions and expense claims.

An approver must check each transaction before finance:

• Confirms the receipt.

• Assigns the general ledger code.

• Checks the cost centre.

• Confirms policy compliance.

That is where the chasing happens, and where the month-end close can slip.

How to manage discretionary spending

Manage discretionary spending by category, with a named owner and controls that act before the money moves. Avoid relying on a single percentage target applied to everything.

KPMG puts the risk of the alternative plainly:

“Introducing a diktat, for example, to reduce spend in all areas by 10% is a crude measure that could result in cutting some activities which help achieve growth.”

Blanket budget freezes and reductions risk cutting into the bone as well as the fat.

A workable sequence for a scaling company looks like this:

1. Tag each budget line as committed or discretionary. Record the contract end date for anything committed so you know when it becomes a decision again.

2. Assign one budget owner per discretionary line. Give owners actuals against budget during the month, not after it.

3. Set approval thresholds and card limits before the spend. Define receipt requirements in the same policy.

4. Review the expense policy quarterly. Travel prices, currency values, and software tiers can all change within an annual cycle.

5. Audit subscriptions against a renewal calendar. Cancel duplicate or idle seats before they renew.

Steps three and four remove much of the retrospective work.

For example:

• Unclear meal budgets can lead to excessive restaurant spending.

• Undefined travel policies can allow business-class flights for non-essential trips.

• Missing software guidelines can leave several teams paying for the same service.

Each problem points to a rule finance can write down once and apply at the point of spend.

Must-haves for your spend management system

A spend management system that controls discretionary spend needs to provide the following capabilities.

Real-time visibility by category and owner

Every card payment, expense claim, and invoice should appear against its budget line as it happens. This allows finance teams to set cuts based on current actuals.

Budget-versus-actual reporting

Marketing, travel, and perks owners should see committed and spent amounts before period-end. Approvers should also see the budget impact of a request before approving it.

Approval workflows with delegated authority

Requests should route by amount, department, or cost centre. Finance should be able to see what is waiting and where.

Card-level controls

Individual limits and merchant-category blocking give each user a defined spending envelope.

Single-use or subscription virtual cards can provide the same control for a specific vendor. Depending on the provider, a rule failure may decline the payment upfront or flag it for review afterwards.

Receipt capture with policy checks

Employees should be able to attach receipts to transactions from their phones. The system should flag missing documents or out-of-policy amounts without requiring a personal reminder from finance.

Subscription tracking and renewal alerts

Each recurring vendor should have:

• An owner.

• A renewal date.

• A notice period.

• A record of the renewal terms.

General ledger coding and accounting integration

Transactions should carry their general ledger and cost-centre codes into the accounting system without re-keying. The record should also retain the VAT treatment.

Duplicate and anomaly detection

The system should surface duplicate invoices and other outliers, including split purchases, for review rather than allowing them to pass through unnoticed.

Spendesk is an all-in-one spend management platform that consolidates company cards, expense management, accounts payable, procurement, and budgeting.

For discretionary spend, that means travel cards, subscription cards, perks reimbursements, and marketing invoices all land in one approval and coding flow. Finance can review exceptions instead of reconstructing the month from six separate sources.

Get a free tour of the platform to see how these controls sit in one workflow.

Frequently asked questions

These answers cover the classification questions finance teams most often face when a cost sits between optional and committed.

Is discretionary spending the same as a variable cost?

No.

Variable costs move with activity, while discretionary costs move with a management decision.

For example:

• A marketing campaign is a discretionary fixed cost. It does not change with sales volume, but you can adjust or postpone it.

• Fuel for a delivery fleet is variable but not discretionary because it follows the deliveries.

Classify each line on both axes before deciding where to cut.

Does a signed marketing contract stay discretionary?

Not for the duration of the contract.

Once a business signs a media placement, sponsorship, or agency retainer, it commits to the payments until the contract ends.

If unavoidable costs exceed the expected benefit, IAS 37 may require the business to recognise a provision for an onerous contract. Whether a specific agreement reaches that point depends on its terms, so confirm the treatment with your auditor.

What share of a company’s budget is discretionary?

No authoritative UK or European source publishes a discretionary-versus-essential split of total operating budgets.

Broader overhead measures include business-critical functions alongside deferrable costs, so they cannot provide a reliable discretionary percentage.

Your own contract terms and operating model determine the useful figure.

Can a discretionary expense be capitalised?

Yes.

The budgeting label describes your freedom to decide. The accounting treatment follows the applicable recognition rules.

For example:

• A qualifying discretionary office fit-out may be capitalised as property, plant, and equipment.

• IAS 38 requires qualifying development costs to be capitalised.

• Other discretionary costs may need to be expensed immediately.

When budgeting and financial reporting run on different bases, you need a reconciliation between the two.

How often should you review an expense policy?

Quarterly.

Travel costs and currency values change constantly. Spending limits or allowances that lag behind those changes may either block legitimate spend or allow out-of-policy spend through.

A quarterly review also catches:

• Subscription tiers that have changed.

• Per diem rates that are out of date.

• Card limits that no longer fit business needs.

• New categories of discretionary spending.