SLC | S21W1 | Costs for Entrepreneurs - Introduction to Cost
I am pleased to join Steemit Learning Challenge season 21 where entrepreneurs are given the opportunity to learn different aspects of costs in their businesses which is an important factor due to the fact that it add to the success and sustainability of the business.
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I will proceed to the task for the week;
Cost simply means the total sum of resource spent in exchange for goods or services which in other words, an amount invested into the financial expenditures needed to run a business. This includes the purchase of raw materials, daily expenses and payment to workers.
My photo: products purchased for my business
Being that cost is an important aspect of business, I will highlight its positive impacts to entrepreneurs.
Sustainability: when there is cost management in business, the business will remain afloat and stable in a longer period of time which will in turn yield good income.
Financial Planning: this allows the business owner to plan budgets and account for every cost in the business.
Risk Management: every entrepreneur understands the risk that comes with running a business, knowing how to manage these risks will reduce unnecessary cost in the business.
Growth: this is another important of cost. Once the costs are well managed, there will definitely be great profit as the business grows.
All the above listed importance of costs are linked with proper decision making.
Costs and expenses are similar but different in meaning. Costs categorize different types of investment in business that are required for production process and its main aim is to yield profits. However, expenses are totally different from costs because profits is not a priority when spending on the daily needs to boost the business.
Other comparison of costs and expenses are;
| Costs | Expenses |
|---|---|
| One time payment | Regular payment |
| Costs are capitalized on the balance sheet | expenses are recorded on the income statement |
| The impact of costs tend to go beyond the current year of business | the impact of expenses are only limited to the current accounting period of the business |
| Costs does not affect the profits immediately | expanses negatively affect the current profits |
Using the current situation in my business to give a real case example;
Costs
I purchased few electrical tools ( hot comb, hair straightener and curler) that makes my hair work easier. These tools are expected to last for at least 10 years or more.
Expenses
In order to keep these tools functioning, I will have to pay monthly electricity bills. What happened when there's no light? I will be stocked up with daily expenses for fuel purchase.
My photo: Electric straightener connected to light
Performing a good costs determination comes with great benefits;
- It helps an entrepreneur to easily know the actual cost of production which in turn makes the setting of price tags fair and profitable.
- It gives a better view on how profits are being spent daily
- It helps an entrepreneur to reduce wastage of resources
- It gives idea on how to target audience.
- It helps an entrepreneur understands market strategies especially when the market is competitive.
- Growth and stability are also among the benefits of performing a good cost determination.
I own a business that is related to women's fashion which is "HAIR"!
I render the following services;
- Selling of hair bundles,
- Revamping of old wigs,
- Closure and frontal ventilation,
- Wig making,
- Styling and
- Lace repair
This works with me calculating my business costs and working with a particular budget weekly.
I know the products to purchase monthly and the ones I need daily. All these includes; products for hair treatment, tools, packaging bags, delivery fee and data cost for marketing online.
I don't worry about fixed costs because I am running a small business. I tend to focus more on the variable costs which are above mentioned category of products purchased for monthly and daily needs.
Lastly, I make sure to record both costs and expenses in order to sum up at the end of the week and know my profits or losses during a particular period.
I will invite friends to join the class @eliany, @lovinah and @josepha
Greetings @ adylinah
1.- You have shared the concept and importance of Cost. The cost corresponds to all that has been invested in the production of a good or provision of a service, so it is important in setting prices and therefore the profitability of the business.
2.- His explanation about the difference between costs and expenses has been quite explicit, in fact he has shown us some ways of accounting treatment of these items.
3.- He has shared with us the importance of costs for the profitability of his business, explaining which are the items in which he invests regularly and how he takes advantage of it to make his business much more solid.
4.- You show us some of the services you provide in your venture, detailing some of the resources you use in providing the service. We would have liked to see how you calculate the cost of some of the services you offer.
Thanks for joining the contest
Thank you for the review!
I see you purchased some styling equipment for your business this is highly recommended as a business owner, this will make your work neat and beautiful, another thing is accountability, working with a cost price will help is not to run losses .
I wish you success with the contest.
Costs and expenses are what keeps the business moving. Business is all about proper management and as such little details on costs should not be overlooked.
Thank you for your contribution!
You are welcome.
Hello friend, these are all useful information that can help business people like me. Unnecessary expenditures when not properly planned can lead to business breakdowns.
As a business man, I always take records of my activities in my shop and at the end of the month, I checked my profits, and what I have spent within that interval. I think all business people need record keeping.
I learned something new about business expenses and planning by reading your post. Very useful information! Thanks and good luck for the contest.