When you look at your small business’s financial statements, there are likely a number of expenses on there. You have insurance premiums, the cost of raw materials, coffee runs, and numerous others.
While your expenses are likely all over the place, they can actually be broken into two categories most of the time: fixed costs and variable costs.
Basically, some operational costs are static while others fluctuate. Understanding what fixed costs are can help you in a big way, from creating a healthier cash flow to generally cleaner bookkeeping to overall reduction of business expenses. But, before we dive into the fun topic of expenses and how to rein in fixed costs, let’s look at what fixed costs are.