![]() ![]() When you consider adding a new fixed cost to your budget you need to think about how it will impact the business now and in the future. Understanding the difference between the two types of expenses can be very helpful in your decision making and forecasting for your business. Other examples of fixed expenses include salaries and insurance. Your landlord, or the bank, expects the same payment whether you filled all the tables each night or not. For example, if you own a restaurant, the money you pay for your rent or mortgage each month is considered a fixed expense. These expenses stay the same whether your company has a good month or a bad month. The fixed expenses of your business do not change when your sales volume changes. Other examples of variable expenses include shipping costs, raw material, packaging supplies, and sales commissions. ![]() The 2% fee to the online payment portal is a variable expense because it changes in proportion to the change in sales activity. That fee will go up to $60.00 if you triple your sales next month to $3,000. If you sell $1,000 worth of products, the fee for the payment portal will be $20.00. The online payment portal you use charges a 2% fee for every transaction. For example, if you sell a product online, there are certain costs associated with the process of selling and delivering the product to your customers. These expenses increase or decrease with the sales volume of your business. Like the name suggests, variable expenses vary depending on certain factors in your business. The topic of expenses may not be your favorite, but it is essential to the well-being of your business for you to understand the different types of expenses and what they mean for your business. But, if you have been in business for any length of time, you know that the fun stuff such as positive cash flow and profit will not continue if you ignore your expenses. There are other topics that are much more fun to discuss such as positive cash flow and profit. As a business owner that is probably not your favorite topic. ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |