![]() ![]() “Depreciation is how you spread out the cost of fixed assets over time – so, for example, property or a company car would be great examples of something that may depreciate over time, so you are effectively devaluing the asset each year, based on an idea of wear and tear,” says Erdly.Īmortisation, she adds, relates only to intangible assets as opposed to physical ones – such as trademarks, patents or franchise agreements, which may decrease in value over time. Here is where you focus on ‘depreciation’ and ‘amortisation’, which relate to the company’s day-to-day expenses. This is the sum of all of your operational business costs. For every £1 you spend, you’ll earn 1 Membership Rewards® point, which can be spent on essential business purchases with hundreds of retailers¹. ![]() You can also make your operating expenses work harder for you and your business when using your American Express® Business Card. “For example, when it comes to packaging, you would have to purchase more with increased handling fees and materials, which are all included in the cost of goods sold whereas fixed costs – like monthly rates – count as operating costs.” “A good test to see if something is an operating cost or cost of goods sold is to ask yourself if you sold twice as many items would that cost go up?” she says. Catherine Erdly, Founder of The Resilient Retail Club, says operating costs relate to everything you have to pay to run your business such as premises, utilities, salaries and the price of fixed marketing, for instance. It shows how much money you’re bringing in from your sales. This is the sum of all the business income generated from the sale of your products or services. Revenue - Operating Costs - Cost of Goods Sold (COGS) - Other Day-to-Day Expenses = Operating Profit. In this article we’ll cover exactly how to calculate operating profit for your business. It helps us answer questions such as when did we start to burn cash and when did we break-even? That point has moved considerably recently as we've been able to reduce costs of operating.”īut what is operating profit? Simply put, operating profit is what’s left when you deduct operating costs, the cost of goods sold and other day-to-day expenses from your revenue. ![]() Lynn Hood, COO at Focus Hotels, who steered the company towards record levels of operating profit during recent uncertain market conditions, says: “We have a full understanding of every cost line in our business, helping us to continually search for our break-even point. Calculating your operating profit is vital for monitoring how your business is performing, keeping you up-to-date on your profitability status and alerting you to any areas of opportunity. ![]()
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