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Company Costs
07 Apr 2015 | No Comments

As we all know in life there are many costs involved to sustain and prolong one’s life span and it is no different to any company. Company costs are carefully monitored and budgeted, but how is this done? How is it categorized? How does a company know how to allocate monies to different departments? Does it apply to charitable organizations as well?

 

As we have all learnt in life, to excel in anything you must first invest. This can come in many different forms such as, time & effort, expenses, training etc. In all businesses private and public sectors worldwide, they are all faced with expenses or what we like to call “bills”.

Types Of Expenses

These expenses are analyzed by qualified staffers and separated into different categories and sub-categories. These categories differ from company to company and can also be dependent on the type of company and the purpose of the expense.

Companies usually check all expenses at month’s end and enter all expenses in their respective categories on their accounting system. Though it may differ by company, there are usually 2 main head categories that expenses are usually posted as, Overhead and business/operating expenses.

There is also a subcategory known as fixed costs and variable costs. Here are some examples and definitions of the most common costs in running a business.

 

Main Categories

Overhead costs These costs are real expenses that are needed to keep the business running such as  Rent, utilities, supplies, marketing costs and taxes.

Operating costs – These expenditures are the same as selling, general and administrative expenses.  Examples of operating expenses include the following:

Advertising costs, Direct mailing, Entertainment costs, Sales material costs (such as brochures),Travel costs, Accounting expenditures, Depreciation of fixed assets assigned to non-production areas, Insurance costs, Legal fees, Office supplies, Property taxes, Rent costs for non-production facilities, Repair costs for non-production facilities, Utility cost, Compensation for non-production employees, Sales commissions (though this could be interpreted as a variable cost that is therefore part of the cost of goods sold), Benefits for non-production employees, Pension plan contributions for non-production, Advertising costs, Direct mailing costs, Entertainment costs, Sales material costs (such as brochures), Travel costs.

 

 

Sub Categories

Fixed costs – are costs that do not change when the quantity of output changes. E.g. Rent The cost of renting a facility to operate a business is one of the most common overhead costs. Unless the business is operated completely online, it will have to either continually pay rent or purchase a facility.

Variable Costs –   A periodic cost that varies in step with the output or the sale revenue of a company. E.g. Direct Materials, The most purely variable cost of all, these are the raw materials that go into a product.

 

So we have learnt that it’s a lot more than just revenue and expenditure that keeps a company running and closely identifying and quantifying costs will allow to it to be more manageable and easier to create budgets to facilitate and control departments’ activities.

 

This process of accounting can be very stressful and time consuming and though it is a critical element in any type of company, it is being outsourced more and more in these ever changing times. The majority of a company’s time is spent on sales or marketing oriented efforts. Outsourcing these services from suitably qualified outsourcing services firms can give sales oriented companies a wealth of time to concentrate on increasing their market share and revenue or even create new products and so on.


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