Budgeting

2. Expenditure Budget

Once you have drawn up your sales budget, you can begin to work out your costs.

VAT-registered businesses should calculate costs excluding VAT.

2.1 What fixed costs will you have?

In other words, which costs must you pay, no matter how much you sell?

• Rent, rates and insurance.
• Interest charges.
• Maintenance and repairs.
• Electricity, gas and water rates.
• Staff wages and expenses.
• Advertising.
• Administration (eg accountants' fees).
• Depreciation of equipment, furniture and other fixed assets.

2.2 What variable costs will you have? In other words, which costs will grow or diminish in line with sales?

• Raw materials.
• Distribution.
• Extra staff costs, for overtime or temps.

2.3 Are any of these fixed or variable costs likely to change?