Identifying a business’s fixed and variable expenses is the first step to maintaining financial management and cash flow. However, this is not always an easy task.
This is because many entrepreneurs still get confused about which bills must be paid every month and which ones arise occasionally. It is worth noting that this distinction is essential to keep expenses up to date, without affecting productivity and profit.
When we talk about rent, payroll, and internet, water, and energy expenses, for example, we are talking about fixed costs. On the other hand, the amount that can be spent in an emergency, such as a broken device, is something variable — it may or may not happen.
There is no doubt that the question about fixed and variable expenses is part of many people’s daily lives, and the best way to answer this question is to understand the concept of each one and how both can impact a business’s budget .
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What are fixed expenses?
As the name suggests, when we talk uae whatsapp number data fixed expenses, the focus is on all the bills that are scheduled. Therefore, they are those that have no direct connection with the production or sale of a product or service.
These are debts that must be paid to keep the business running, i.e., foreseeable expenses that are already included. Check out some examples of fixed expenses:
- rental of commercial space;
- taxes ;
- employee payments;
- water, energy and internet bill;
- expenses with software and systems.
It is worth mentioning that the amounts paid to employees are included in fixed expenses. However, if the company works with commission, it is necessary to include this additional amount in the variable option, after all, it is only possible to make a cost estimate — without accuracy.
Electricity and water bills can be classified as fixed expenses, because, although the amount varies each month, it is known that it is a monthly expense and that it is unlikely to have a very large variation.
What are variable expenses?
On the other hand, variable expenses are introduction to digital marketing: best practices and channels that depend mainly on sales and production figures. In this case, the amount that must be paid can be changed according to the indicators.
Unlike the first situation, in which it is possible to measure all expenses, here it is best to have an estimate, which can be changed according to productivity.
Therefore, it is essential to have a plan focused on variable numbers, after all, it is necessary to have a healthy cash flow . See some examples:
- reimbursement of business costs;
- delivery costs;
- fine for late delivery;
- sales tax;
- maintenance;
- commission of employees.
Additionally, emergency expenses are included in variable expenses, such as equipment repairs.
How do fixed and variable expenses affect financial control?
You can see how much fixed and frist database expenses can impact the financial health of your business, right? That’s because if these costs are not in your financial planning, it’s very likely that some bills will behind.
Therefore, it is important that you understand each of the accounts and that both are added to the budget. The fixed one with the determined values and the variables with a preview of what can be spent.
