Carrying out financial activities is not an easy task. You have to deal with numbers, values and prices carefully, because an error can mean a great loss to the company. In order for financial management to be done correctly, it is necessary that the person responsible for difference between costs, expenses and expenses. So we've prepared this post with explanations and examples that can help in understanding. Check out.
Every investment a company needs to make to produce a product or offer a service is called cost. Without this value, it is not possible to start or continue sales. To increase the quantity produced, in general, it is necessary to increase the cost of the company.
Here we can also define the concept of "cost price", which is the minimum amount spent by the company to manufacture a given product. If the material is sold at cost, the company has no profit. On top of the cost price, is to calculate the selling price - the difference between the two is profit.
Examples: raw material, water, electricity from production, machinery depreciation, packaging.
Expenses include everything the company needs to have to keep the minimum structure working. They are values invested in the commercial, administrative, marketing, human resources. Expenses are not directly linked to the production of new items that will be sold by the company, but may have an influence on revenue growth.
The expenses can be divided into two categories:
- Fixed: they do not vary with the amount of goods or products sold by the company, such as office supplies
- Variables: it varies with the quantity of products produced by the company, such as commission of sellers.
Examples: salaries, office supplies, telephone, rent, commission of sellers, purchase of advertising.
Expenditures are the values that the company did not predict in the budget, but that need to invest to continue production. As an expense is unpredictable, it is not possible to be passed on in the price of the product, therefore, the company must bear the loss.
Examples: defective part replacement, service.
In order to manage the costs, expenses and expenses of your company, it is ideal to use a cash flow spreadsheet. Using the tool, managers can roll in and out, check what they need to pay and what they have, and thus analyze how the company's cash flow is going. In addition, you can access the financial statement (DRE) and evaluate the reports that are generated automatically.
A spreadsheet cash flow streamlines various activities, increasing team productivity and allowing those responsible to have more time to devote to strategic business planning.
Did you have any questions about the difference between costs, expenses and expenses? Leave your question in the comments below.