How do I use the manage overheads module?

What is an overhead?

There are three types of overheads

• Fixed 
• Variable 
• Employee expenses

What are fixed overheads?

Fixed overheads are costs that remain constant, regardless of the level of output that your business produces. 

Examples of fixed overheads include:

• Your monthly rental bill
• Your insurance plan
• The cost of your broadband

Such costs include general administrative and selling expenses which are generally independent from the volume of activity.

What are variable overheads?

Variable costs are costs that are directly related to the volume of goods and services that your business produces or sells.

Examples of variable costs include:

• Bank fees which will depend on the number and type of transactions
• Commissions such as referral fees which will depend on the volume of sales generated by distribution partners

These costs usually increase when business activities increase and fall when output falls.

What are employee expenses?

Employee expenses are costs that are incurred as a result of hiring staff to help run a business.

Examples of employee costs include:

• Gross salary
• Employee social contributions

These costs usually increase as businesses recruit more staff and fall when workers are made redundant due to those skills no longer being required.

Our software has a dedicated employee element to make it easier to model your payroll of individual employee or entire categories of personnel.

Alternatively, you can use fixed or variable cost to model your payroll. In that case you'll need to set the category to "personnel" in the advanced parameters so that the liabilities can be mapped correctly in the balance sheet.

How does the manage overheads module work?

At the centre of the module, you will find a table which details each overhead and its corresponding cost or expense.

You can view forecasted overheads data for up to 5 years from when you started the business plan.

You can edit, copy and delete overheads by using the buttons in the table.

You can reorganise overheads in the table using drag and drop.

Beneath the table, you'll find a pie chart that illustrates the weight of each category in the cost structure.

How does the manage overheads module impact my financial forecast?

The Business Plan Shop's Our software will use your overheads data to create your forecasted financial statements (P&L, balance sheet and cash flow statement) and in your business plan.

These statements also form part of the financial plan section of your business plan. 

As soon as you save a new overheads amount, the software will automatically recalculate everything to ensure that your projected financials are up to date. It’s fast and simple, meaning that your plan will always be ready to export.

When building your forecasted financial statements for your:

Fixed or variable overheads:

• We’ll use the amount entered to build the SG&A section in your P&L.
• We will then use your payment terms and optional VAT/GST settings to build your balance sheet’s liabilities (amount owed to suppliers and tax owed to the government)
• We’ll then combine all this data to build your cash flow forecast.
• If part of the cost needs to be deferred to the next accounting period, you can use the optional deferred costs module. In that case, we’ll also adjust the amount recognized on your P&L and balance sheet accordingly.

Employee expenses:

• We’ll use the amount entered to build the SG&A section in your P&L.
• We will then use your payment terms to build your balance sheet’s liabilities (amounts owed to employees and social contributions owed to the government)
• We’ll then combine all this data to build your cash flow forecast.

What advice can you give me relating to the module?

Estimate your fixed overheads

The Business Plan ShopOur software will prepolutate your forecast with a list of costs common to most businesses. 

But all businesses are unique, we therefore recommend that you create a list of all the goods and services required to run your business and obtain cost estimates for each from potential suppliers. 

• List all of your business expenses (rent, insurance, etc.)
• Approach suppliers or lookup prices online to obtain an estimate of the cost, payment frequency and potential payment terms (for example, insurance premiums may work out cheaper if you pay in advance).
• Enter the corresponding costs in the table.

Useful tips

• If you are on a start-up business plan type: don't include one-off starting expenses here, these should be inputted in the sources & uses module so that they can be isolated in the opening balance sheet
• Don't include the purchase of large equipment here, these require a specific accounting treatment and should be included in the investments module
• Try to group overheads by categories in order to make it easier to track your performance against your budget going forward. As a rule of thumb, if an expense represents less than 5% of your projected sales then you are better off grouping it in a category.

Frequently Asked Questions