There is no reward without risk and there is no income without costs. There are, however, a few cost in business that are often overlooked because often business leaders under estimate the significance these cost can have on business overall profitability.
These are your selling cost; these are cost that are incurred as a result of selling goods or services. Most selling costs are variable. This means that the amount of the cost is due to the size of the selling activity. However, some selling costs are fixed. Examples of selling cost are: delivery costs, commission paid to sales representatives, promotional costs, trade discounts, warranties, after sales service costs and merchant fees for displaying goods or services on third part portals, blog, apps or websites. All selling costs must be shown in the Profit and Loss Statement as an expense except for trade discounts. Trade discounts even though it is a selling cost, for accounting purposes this costs is netted off against revenue or sales in the Profit and Loss Statement.
Do you need to include selling costs in your pricing strategy? The answer is yes! Selling costs can make a significant impact on business margins. A matter of fact selling cost can impact on business margins and its success in a very big way. There are others costs that a business must incur in order to exits or function, so not taking into consideration your selling costs when assessing your final price to your customers will be a big mistake. Many businesses fail because they are oblivious of the true costs of selling. Take for example warranty. Warranties are guarantees that are given by a seller to give the buyer surety of the performance or quality of the product or service. Warranties are difficult to cost as they are intangible. Nevertheless, it is important to estimate the probable cost of the warranty so that one can provide for any loss as a result of a claim by the buyer.
Therefore it is very important to consider the impact of selling costs on your business in order to make wise decisions for business overall and continuing profitability.
Please leave a comment below and share how your selling costs have impacted your business. What lessons have you learned?