Types of Business Costs – to help with Cash Flow Projections

By Jumpstarter

This article serves to simply help you to categorise business costs that you will come across in your business plan cash flow projection or forecast.

1. Once-off costs versus periodic costs

When preparing your cash flow, you will come across costs that are once-off and costs that you would have to pay every month for example.

A once-off cost would be the initial cost to develop an app. A periodic cost would be maintenance and improvement of the existing app.

A once-off cost would be the cost of incorporating the company – as you only have to pay this once.

A periodic cost could be your telephone costs or your electricity bills.

It is needless to say that a once-off cost should be included once and a periodic cost should be included for each month that it applies in your projection.

2. Decide on what is an optional cost for your business

There are some costs that you could avoid if you choose to. You need to determine which costs these are and what course of action you intend to take.

You could opt to have an outsourced bookkeeper who maintains your financial information. This I would count as an essential cost.

You could then potentially decide to bring in an expert to really help your business grow – like a financial consultant specialized in this field.

They could look at the numbers and identify where you are going wrong and where you can improve. They could assist you in creating a concrete strategy to direct your business into the future.

This would be more of an optional cost because your business can operate without it.

When preparing your cash flow projection, you need to determine which optional costs you are going to expend and which you choose to do without.

We would suggest having a couple of versions of cash flow projections where you have an optional cost included and where you have the optional cost excluded.

Which is more likely to reap the best result for your business? Think long-term here.

3. Fixed versus variable cost

The meaning of these is contained in the name.

A fixed cost would remain the same at whatever frequency. A fixed cost would be for example your rental cost. If you have an online store, this could be your monthly uncapped data cost.

A variable cost will change month on month based on what is driving the cost. Variable costs would be for example the amount of material that you use to manufacture a product. The more products you manufacture, the more it will cost you.

Note: that this is a simplified example and does not take into account economies of scale.

 

In your cash flow projection, make sure that you include the fixed costs at the amount it is fixed at. Include the variable cost based on the item driving the cost such as number of goods to be manufactured that month.

Final Verdict

Crowdfunding in South Africa is taking off. While Jumpstarter Crowdfunding can raise large sums of money for your idea, the key is correctly managing the crowdfunds that successful Jumpstarter Project Creators have received.

Preparing a cash flow projection requires an in-depth analysis of the costs involved in running the business. Having said that, you don’t have to be a chartered accountant to analyze these costs.

You just need to apply common sense. But be sure to seek help if you feel overwhelmed.

6 Comments

  1. Edmund Malebe

    I am a 35 year old man from Mpumalanga, have a logistics business with two trucks and side tipper trailers, the business has been operating for 13 months now and the only problem I have is cash flow to cover day to day operating costs and expenses for my business to run smooth. The problem started in October when I was transport Chrome in at Steelpoort in Limpopo, one of my drivers took my truck to the zama zamas without my instructions or permission and he was caught and arrested and my truck was impounded for something I do not know, now I cannot make money I stopped working in Steelpoort because I do not want my other driver to go to the zama zamas.

    Now I found a Subcontract at the big Mining company which has already started in February, I do not have capital to operate smoothly, to pay day to day expenses and costs and maintain my trucks and trailers. I need an amount of R150 000 to service my truck and trailer and pay day to day costs and expenses.

    I will really appreciate your help

    • Jumpstarter

      Thanks for your message Edmund.

      Please read our Frequently Asked Questions here.

      To get a project properly setup for funding, we advise you review our article 7 Things to Consider BEFORE you Launch your Crowdfunding Project.

      Please remember, Jumpstarter is a Rewards-based Crowdfunding portal.

      People donate to projects for

      • REWARDS! Project creators inspire people to open their wallets by offering smart, fun, and tangible rewards (products, benefits, and experiences).

      • STORIES! Jumpstarter projects are efforts by real people to do something they love, something fun, or at least something of note. These stories unfold through blog posts, pics, and videos as people bring their ideas to life. Take a peek around the site and see what we’re talking about. Stories abound!

      Our Frequently Asked Questions, Guidelines and Jumpstarter Crowdfunding video are great for understanding how to use our crowdfunding portal.

      • People appreciate it when Project creators show who they are and how the’re personally involved to bring their project to success!
      • There is importance to add Featured Image/s to showcase your project / idea
      • It is important to add a few Rewards offerings (at least 3 = entry level, intermediate level etc) for potential Project Backers
      • Adding a brief video to tell your story is also very powerful.
      • Ensure your project time period is between 1-60 days.

      Please review the ‘Gus Brown – Help us along our journey to create our Debut Album called #Fullcollision‘ and ‘Adopt A Child For Christmas Campaign‘ campaigns which were well constructed, launched successfully and exceeded their goals!

      Once all the

      (1) details are understood,
      (2) correctly setup through our Start a Campaign page,
      (3) reviewed and approved to be ready by Jumpstarter admin team,
      (4) we approve to go live!

      All the best,
      Jumpstarter Crowdfunding team

  2. Rajesh Sharma

    Tips really up to point, I just got driven into your blog and now I feel good to get a proper information of what to be done. thanks mate.good job.

  3. Owen

    Me an d my partner we have registered a business. Enterprise name is avast Clean-Ups.we want to specialize with cleaning.so now help from you guys.our business need profile/plan even marketing.

    • Jumpstarter

      Thanks for your message Owen.

      We started Jumpstarter as a new way for creators and audiences to work together to make things. The traditional funding systems are risk-averse and profit-focused, and tons of great ideas never get a chance. We believe Jumpstarter could open the door to a much wider variety of ideas and allow everyone to decide what they wanted to see exist in the world.

      Jumpstarter is full of ambitious, innovative, and imaginative ideas. Many of the projects you see on Jumpstarter are in earlier stages of development and are looking for a community to bring them to life. The fact that Jumpstarter allows creators to take risks and attempt to create something new is a feature, not a bug.

      Our Frequently Asked Questions, Guidelines and Jumpstarter Crowdfunding video are great for understanding how to use our crowdfunding portal.

      All the best,
      Jumpstarter Crowdfunding team

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