Financial terms: Expenses
Have you ever thought about which are the general expenses of your business/studio and how they are categorised? Keep reading to find out!
But first, let’s define expenses: any costs incurred by a company to generate revenue. In the fashion sector, there are operational expenses, expenses incurred for side projects, wages for employees, and G&A expenses.
Under operational expenses, you’ll consider the following:
COGS: This includes any direct costs associated with producing clothing items, including fabric, zippers, thread, patterns, labor to make the items, packaging materials, etc.
Shipping & Distribution: How much does it cost to receive your final items from manufacturers, and how much does it cost to ship them to customers?
Machinery & Equipment: Sewing machines, cutting tables, software, and computers are reasonable expenses for a fashion designer or someone in the fashion sector.
Regarding additional projects, like pop-ups or special collections, any expenses generated by these endeavors are paid by additional sources of revenue different than the main one and recorded separately during bookkeeping.
SG&A expenses are non-production, day-to-day costs. These include:
Marketing & Advertising: Any related to your website, social media accounts, or advertising in general.
Rent & Utilities: These are the monthly expenses related to having a shop!
Professional Services: Some of the most common professional services include an accountant and lawyer to ensure you do everything correctly. Also, make sure you have insurance to cover your butt!
Wages are divided into other expense categories. The category depends on the activity the employee does, e.g.: Anyone working in your shop, helping you with administrative tasks, have their salaries categorized under SG&A! While employees directly involved in production activities have their wages under operational expenses → COGS. This includes full-time or mini-job employees, contractors, etc.
We challenge you to review your expenses! Where can you reduce expenses for your company?
