Speaker: What do all these expenses that are listed each month mean?

Fred Glave: Expenses are the thing where you are going to spend a lot of your money and control of your expenses therefore becomes very important. But you can't control your expenses unless you know what you plan to spend. So basically what we are talking about here is all of those things that you have to do on an ongoing basis month on month, big item is rent. You are going to have to pay rent each month. Another big item is salaries, if you have employees and so you would estimate your salaries as a particular a line item on the spreadsheet with holding tax and unemployment tax and workers compensation. So the benefits associated with your employees will be a line item that you will have to estimate on a month by month basis. Other such things are utilities, insurance, legal expense supplies, telephone maybe Internet service and access and all of those typically tend to be monthly expenses. There are some expenses that you may only pay quarterly such as insurance and legal fees, but in your profit and loss statement, you want to spread those over the total year. So you will take the amount that you spend in a quarter and divide by three and put that amount under each month of the year. When you are all done, you add up all those expenses and you get your total expenses for the month. If you subtract that from your gross profitability that we talked about earlier then you will have your net profit for the month and clearly the objective of your business is to sell enough, generate enough profitability that you can pay all your expenses and still have some money leftover. That's the profit in the business. 1