lStart-up costs are funds paid for things that are necessary for the business to become operational. For a manufacturing company these might be setting up a workshop, buying manufacturing equipment and ensuring that all safety requirements are in place.
It also includes money that will be used to buy materials to start production.
Start-up costs are once-off expenses, and unlike working capital are not incurred every month. If you have limited funds, avoid high start-up costs. Buy only equipment and stock that are central to the operation of the business.
lWorking capital is the money used to pay the costs of the day-to-day running of the business. They include rent, wages, electricity, telephone, loan repayments and many sundry costs .
l There are two types of operational costs - fixed and variable.
Fixed costs are not determined by the volume produced or the type of service provided. For example, a mechanic will pay a fixed rent every month no matter how many cars he repairs.
Variable costs change depending on the volume of production or the type of service that is provided. They usually include costs for labour and material, which vary from one job to the next.
An electrician installing a new wiring system in a hotel will spend more time and use more material compared with installing a wiring system in a small house.
lIncome means the gross amount paid to a business for work done. Among these are costs for labour and material bought to produce the product, as well as its profit.
For more definitions of business terms visit www.moneybiz.co.za