The most common monthly costs of business
Doing business is a constant battle between costs and profits. The key is to not see costs as a downside but as a necessity. So many brands see it the opposite way and they end up saving the pennies so they can lose the dollars. Customers will not want cheap products, they want affordable products. It’s not the same thing. We have to be aware that monthly costs are always going to need to be monitored. Monthly costs are usually going to be overseen by internal audit and the finance team but as a business owner, you should be paying closer attention to your costs because you should be asking some important questions.
What is necessary?
Asking this question will always allow you to focus on the most important aspects of your business. These are the necessary costs.
- Raw materials and manufacturing. If you produce products, there’s no way to avoid these costs but you should always ask if you’re buying the right materials from the right suppliers.
- Employee salaries. It’s so important to assess if you are paying your employees correctly. Too little and morale will slip and too much and you could be taking money away from other vital areas.
- Supplies. Everything from equipment, tools, machines, are necessary if you produce your own products. Specific supplies matter. If you’re a car manufacturer, car batteries, headlamps, tyres and more are relevant to you. If you’re a tattoo brand, you need tattoo supplies such as ink, cartridges, needles, etc.
- Premises. You need an office, manufacturing plant, production facility, etc, to work. The rent is going to be a major expenditure which you should always be questioning.
Employees not only need salaries but they need various other costs to be paid. For example, if you require your executive team to network, travel to conferences, speak with clients and partners, then you will require travel expenses. It’s common for your executive board to travel at least once a month. So depending on the distance, hotel costs, food, etc, you’ll need to always be ready to increase the travel budget. This is especially true during times of importance such as product launches, investment campaigns, marketing etc.
Raw materials are crucial to your business but they should always be assessed. The costs of raw materials might go up and down depending on how the market is behaving. So if this month the cost of your raw materials has gone over your threshold that you are willing to pay, then you should consider working with several raw material suppliers instead of just one or two. Raw material costs can be managed better by employing sourcing experts to find smaller more affordable suppliers that have only just started doing business.
These are some of the most common business costs, which you should be aware of the most. Once you can understand your monthly costs, you can better manage your annual budget and make savings that count.