Why Expense "Buckets"?
When projecting, it is easier to group expenses into 5 major categories, or "buckets".
Variable expenses are a percent of sales; the monthly dollar amount rises and falls as sales fluctuate.
Fixed expenses average essentially the same dollar amount each month.
(If you've not yet set up these categories on your P&L, use The ROI's SPEEDY Expense Analyzer.)
VARIABLE EXPENSES
SELLING Expenses -
Examples: Store payroll, including taxes and benefits; Advertising; Bags & boxes; Special events; etc.
FIXED EXPENSES
OCCUPANCY Expenses - Fixed expense, essentially flat $ amount each month
Examples: Rent; Utilities; Maintenance; Security; CAM charges; etc.
ADMINISTRATIVE Expenses - Fixed expense, essentially flat $ amount each month
Examples: Management salaries (Owner; General Manager; Buyer) including taxes and benefits; Support staff/services (bookkeeping; IT; warehouse; marketing); Interest on borrowed money; Professional services (legal, accounting); Training; Travel; All other expenses not included elsewhere.
TAXES - Federal, State, Local taxes not included elsewhere.
DEPRECIATION/AMORTIZATION - Fixed expense, essentially flat $ amount each month.
These are non-cash expenses, and must be kept separate in order to project the Cash Flow.