Tuesday 8 April 2014

Business Costs to Consider Before Finalizing Your Budget

Developing a budget is a business best practice. Budgets provide accountability month-to-month and ensure that you gave some realistic thought to your expenses. Before finalizing your budget, there are some variable and semi-variable business costs you should give consideration.


Budgeting for utilities poses a particular challenge because so many factors influence the bill. Weather, employee habits, and types of equipment all drive the bill up or down. In a leased space, you’re stuck with the HVAC units the landlord provides. Older HVAC is usually less efficient and costs more. Average utility cost estimates for a space give you a general baseline, but won’t necessarily reflect your bills. Padding your estimates for utility costs, especially the first year or two, helps you avoid a nasty surprise.


Shipping is another area where costs prove unpredictable. On one level, your total shipping costs hinge on your total sales. Lower sales means you’re shipping fewer units and shipping companies charge more for that. Higher sales push your costs up, but give you room to negotiate a better per-unit rate. Fuel price variability alters shipping costs, even if you ship the same number of units every month.  Prices will also vary based on how fast you need your shipments to arrive. For example, air freight in Houston will cost you a bit more than truck services. You cannot reliably predict all of those factors, but forecasting helps you develop a best guess about future sales volume and lets you ballpark a shipping budget.


Marketing is a strange combination of predictable and variable costs. For example, the cost of running the same print ad in the same publication is predictable. That cost remains stable, regardless the total number of eyes that see the ad. The costs of other forms of marketing, such as sending product offers to your newsletter email list, depend a great deal on popularity. Email autoresponder services, such as Aweber and GetResponse, charge monthly fees based on the size of your list. The more popular your newsletter, the more it costs you to send it.

IT Infrastructure

The increasing trend toward automation makes your information technology infrastructure an ongoing cost concern. You may discover that the hardware and software combination that supported 200 customers can’t scale up to handle 1000 customers. If you anticipate rapid growth, you need a sufficient IT budget to support hardware upgrades and licensing scalable software solutions.

Budgets offer the benefits of accountability and force you to examine your ongoing costs. Before you finalize your budget, be sure you’ve given serious consideration to uncertain costs that can throw your budget off, such as utilities and IT infrastructure.

Do you have have any questions or suggestions? Write in comment section.

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