Dividing expenses into fixed and variable costs is a way to facilitate control, based on the pattern of behavior of an account in relation to volume or activity. While the total variable cost changes according to production, with fixed costs the relationship is always the same, no matter how much is produced. But, as we will see later, this distinction is not always easy to make.
Correctly identifying the types of costs is useful for resolving accounts in the red, in addition to helping control the budget. After all, when a business is doing badly, it is by cutting expenses that recovery becomes possible. On the other hand, in times of growth, it is knowledge of monthly expenses that allows you to make the right decisions in view of a new scenario.
Therefore, to control your costs and be able to price your products correctly, continue reading this post!
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How important is cost management for companies?
By correctly classifying your costs, you south africa whatsapp number data find out your break-even point, which is how much you have to sell to cover all your expenses. This is important information, as it serves as a guide for business planning.
Also pay attention to the proportion between variable and fixed costs, as this indicates how much an organization is adaptable to changing situations. In this regard, the higher the percentage of variable costs, the lower the probability of losses.
On the other hand, higher fixed costs can become a problem if their sources are underutilized. This is what happens with properties, which, if their spaces are not, can represent a burden on the budget.
In any case, fixed costs tend to increase when sales volume is high, so when it is lower than the break-even point, losses are inevitable.
And there is much more to consider regarding the division of costs in your company. See below how the knowledge of what is and what is variable influences your results.
Finance management
The end of the month is sometimes hiring is more profitable than business and you start to feel a chill, not knowing if your accounts will balance? Maybe you have the habit of only remembering your expenses between the 1st and 15th, and this is a huge mistake. The direct benefit of correctly dividing your costs is precisely to reassure you about meeting your obligations.
You will know in advance when to pay and how to allocate resources to cover your expenses. Your finances will no longer be a source of frustration, since knowledge provides a broad view of your operational and resource needs.
Control of inputs and outputs
It is no coincidence that the b2b phone list between and variable costs is closely to another component of financial management: cash flow control. This is one of the most critical points in amateur-managed companies, where it is common to mix business expenses with those of their leaders.
From the moment you dedicate yourself to recognizing and categorizing your costs, you must necessarily implement control over your income and expenses. It’s as if you were putting a magnifying glass on your budget. By monitoring everything that comes in and goes out of your cash register on a daily basis, you will gain a new perspective on your expenses.
This also means that solutions can only emerge from what the movement of resources in and out shows.
