How to start with cash flow management Part 4 - Variable Costs

In my last article, I have shown you how to categorize your fixed expenses In This one, I will help you to categorize variable costs.

You have now successfully finished the first steps in cash flow planning. You have collected all information, started with income, and divided them into categories.

The Income is important for cash flow because you will adjust the expenses to them.

Remember, some companies make money and others that save. And this will be also important to be aware of the profitability of each income stream.

Once you have an idea of the income that is likely to come on a given day, you can start with expenses.

Variable Costs

Variable Costs are expenses that can come every month but with different amounts or expenses which don't come every month.

These types of expenses are the ones you can reduce in a time of crisis or increase in a time of expansion.

Thanks to the previous steps in cash flow planning, you know how much money will flow-in in a given period and which expenses are associated with contractual obligations. After that, you can determine how much money the company has left. Then, you can add additional expense items after this subtotal line.

These are all considered costs to which you are not contractually obliged, for example, repairs and maintenance, education, or marketing.

It would be best if you didn't cut expenses at this time. You can include them in the cash flow statement with a possible payment date. After that, you need to see which are good or bad. The good expenses are investments for future revenue and bad expenses are just transactions that take your money from the business.

The best way to continue using the cash flow management tool is to create it as maintenance-free as possible.

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