finance : how to estimate your costs? by impulse

Download Finance : How to estimate your Costs? by Impulse

Post on 10-Dec-2014



Economy & Finance

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  • 1. Costs assumptions Catherine Blondiau Rodolphe dUdekem dAcoz Business and Finance Advisors @ IMPULSE.Brussels
  • 2. Sales Costs of goods/services sold (Other) Operating Costs
  • 3. COGS : Cost of Goods / Services sold = Cost of Sales Variable costs directly linked to the goods / services sold and highly or totally proportional to the sales Can be close to zero for some kind of activities Much easier to predict than the volume of sales itself (should logically be based on tangible elements)
  • 4. COGS : Cost of Goods / Services sold Two main categories: a) goods purchased and/or manufactured NB: attention point: means a potential inventory and an additional financial need b) other costs, linked to sales, with no impact on inventory NB: eg. Transport, paiment or packaging costs
  • 5. COGS : Cost of Goods / Services sold Deducted from the sales, it will give the gross margin or gross revenues NB: often an important parameter, notably to monitor the evolution of profitability & to make comparison with company in similar business In some cases, there is a grey zone whether some costs should be integrated in the COGS or the general expenses, with some freedom to choose
  • 6. COGS : Cost of Goods / Services sold Do not forget that the cost per unit sold can change following different parameters such as inflation or the evolution in the volume of sales (bargaining power with suppliers)
  • 7. Margin : relative notion A margin is a relative concept ! Be aware that its all about points of view. Otherwise, it could lead to misinterpretation. for example, for the gross margin, it could be expressed in terms of: - an amount in currency - a percentage of the sales (without VAT), which is the most commonly used approach - but also sometimes as a percentage of the costs (quite unusual for gross margin but stil )
  • 8. Margin : relative notion Cost of goods / services sold: 100 Sales: 150 - Margin expressed in : 50 - Margin expressed as % of costs: 50% - Margin expressed as % of sales: 30%
  • 9. Sales Costs of goods/services sold (Other) Operating Costs
  • 10. General Expenses or Fixed costs General Expenses Or fixed costs Or selling, general & administrative exp. (SGA) Rent & Maintenance expenses Utilities, Telephone, Internet & Licences, etc Insurance & Bank fees (not the financial interests !) Third parties / subcontracters, notably : Accountants, Lawyer fees, External sales, etc
  • 11. General Expenses or Fixed costs Marketing & Communication expenses NB: not to be underestimated ! Travel & representation expenses HR costs other than salary and related costs Taxes (not the taxes on profit) Unexpected expenses !
  • 12. General Expenses or Fixed costs R&D (if not integrated in the investments) Use of tangible assets (if not integrated in investments) Expenses versus Investments Profit & Loss account versus Treasury Consider what could/should be considered as pure costs, to be opposed to costs than can or have to be activated (on the balance sheet) & amortized
  • 13. General Expenses : HR costs Employees versus Workers Director (self-employed) versus staff under contract NB: social costs linked to the shareholder of a company working for it under a self-employed status is not to be included in the FP of the company, unless specifically foreseen The differences in the fiscal status and in the costs berd by the company for both categories are quite significant (eg multiplication effect x 1.34 x 13.92 !)
  • 14. Costs with no impact on treasury Amortization, Depreciation & Provisions : (= costs not implying a direct cash out) Amortization is automatically calculated in the template based on the investments (and the amortization tenor) Depreciation & Provisions are not included at this stage (not relevant for a starter)
  • 15. IMPULSE Too many things to list them all here! We inform you, we guide you and we accompany you in a whole range of areas such as creating an enterprise, financing, innovation, town planning, environmental permits, partnerships by means of newsletters, websites, seminars or tailored coaching. Briefly, we create a complete ecosystem in which you can grow as an entrepreneur! More info on our websites : - -


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