What are initial expenses?

The concept of initial expenses in the financial field refers to the budget that runs a company before undertaking a project. For the proper functioning of a company it will be necessary to have a series of assets and personnel that will depend on the characteristics and size of the company.

So that there is no room for errors, it is necessary to differentiate between initial expenses and investments. The acquisition of a service, good or resource necessary for the correct performance of the entity will entail an expense, while the good purchased by the company that is not consumed immediately and is entrusted to get the best possible return over time acquires the investment denomination.

The calculation of the initial expenses supposes a basic task at the moment of undertaking. Professionals and businesses that do not contemplate this see how shortly after starting the project they run out of money and are forced to resort to external financing, with the subsequent increase in costs. Therefore, it is essential to prepare a initial investment plan in which all the expenses necessary to start the activity are defined with the greatest accuracy.

When stipulating the initial expenses, you have to be very prudent, since generally the income is slow to arrive and almost always below our expectations.

Tips for calculating startup expenses

To avoid liquidity problems shortly after starting a company you should take into account the following recommendations.

  • Prepare a business planKeep in mind that you always end up spending more than you originally planned. You have to adapt the plan to the reality of the business and potential customers.
  • Reduce expenses to the maximum: it is not necessary to make all the investments at the beginning of the company's activity. The expenses will be made according to the needs.
  • Correctly calculate your prices: in addition to positioning yourself in the market, you must also assess what is the best price to cover the expenses of the beginning.
  • Information on legal procedures: starting a business project requires a series of bureaucracy and procedures that many times we do not take into account. Make sure you know all the precise procedures, in addition to the payment of impuestos.
  • Credit expenses: a bank loan would entail an extra expense that could be eliminated. The interests will go up in the case of not amortizing the capital or the interest rate is variable.

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