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Wages and salaries
Sending an invoice is not getting paid and customers are always reluctant to send their money. If you extend say, 15 day payment terms conservative and plan for at least 30 days before the cash will arrive. It’s better to be pleasantly surprised than unexpectedly cash poor.
Your cash position or cash flow is the operating center of your business. Positive cash flow says you are ahead of the game; negative cash flow says you have a problem. If the money is not in the bank, your bills won’t be paid unless you borrow there by creating another expense.
Line cost / expenses are as you forecast them and with realism. Wages and salaries have overhead burdens as previously discussed, so a loading should be made to reflect the true cost of an employee. If a salary of, say, $20000 per annum is the gross agreed with an employee you may have additional cost burdens that could be between 10 – 40% of the promised salary depending on the term and obligatory costs associated with employment of staff. The actual cost of the employee really becomes $22,000 per annum or more. Perhaps you wish to implement retirement or insurance programs for staff; these are additional employee overhead cost.
As discussed earlier, cost of goods is what your product cots you to bring it up to the point of sale to your customer. If you buy crate of apples for $25 in the morning and sell all of them during the day for a total of $40, your cost of goods can be the $25 that you first paid and your Net Income is $15. However business is seldom that simple particularly if you are manufacturing s product and must purchase assembly items to prepare it for sale.