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Investment v costs

19 December 2023

Distinguish between daily costs and strategic investments. Safeguard impactful expenses in 2024 planning, but be cautious about reducing vital investments. Seek expert guidance for effective financial strategies and recovery.

There are two ways to consider the effects or benefits of business and personal expenditure.

Distinguishing Expenditure: Investment vs. Daily Costs

The payment of rates or utility costs are an essential part of our daily expenditure. However, it would be difficult to view them as an investment.

Whereas, the cost of building a new online sales platform for your business may create opportunities. These can include; winning additional sales for your business or additional income for your family finances. But the costs of the build are a real expense.

Any costs that you undertake that will have a direct impact on improving your financial situation should be considered an investment rather than an expense.

Having made this distinction, it makes sense, when you are considering cost cutting or planning your finances, to protect investment costs and see if you can reduce those costs that are not going to have a direct, positive influence in 2024.

Strategic Financial Planning for 2024

In certain cases, the two distinctions may rub shoulders with each other. For example, investing in solar technology, while not impacting your ability to earn more, may help you reduce your ongoing electricity costs.

If we are to recover from the economic challenges of the past few years, we must address a more considered reclassification of our planned outgoings.

Be wary of reducing investment expenditure.

Other aspects of your expenditure that will also need consideration in this exercise could include:

  • Will an investment in a new piece of plant really have a positive impact on your sales or could the expenditure be deferred until trading conditions improve?
  • Do you really need to change your car? It may get you from A to B more comfortably, but it will likely use financial resources that may be more profitably employed in improving productivity and sales/income.

Trimming costs or expenditure that will have little impact on your future financial prospects makes sense.

Trimming “investment” costs that could have a positive impact makes less sense.

We recommend that your take this distinction into your planning for 2024. And if you need help creating plans, pick up the phone. We can help.

Source: Other Tue, 19 Dec 2023 00:00:00 +0100

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