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Money makes the business move.

Every business needs to understand where its money comes from, where it goes and what remains. Learning a few basic financial concepts can make business money much easier to understand.

REVENUE−COSTS=PROFIT

Three words. One important relationship.

Money in 60 seconds.

  1. Money in — RevenueMoney a business earns from its normal business activities, such as selling products or services.
  2. Money out — CostsMoney spent to operate the business.
  3. What remains — ProfitMoney remaining after costs are subtracted from revenue.
LossA loss occurs when total costs are greater than total revenue.

Try the numbers

Let's do the maths.

A café sells 100 drinks for AED 15 each.

100 × AED 15 = AED 1,500 revenue

AED 1,500 − AED 1,000 costs = AED 500 profit

Making AED 1,500 in sales does not mean the business made AED 1,500 in profit.

PAVE CAFÉ

Example Monthly Costs

RentAED 6,000
Staff wagesAED 9,000
IngredientsAED 4,500
PackagingAED 1,500
UtilitiesAED 1,000
TOTALAED 22,000

Where does the money go?

Example figures are used only to demonstrate how different business costs can add up.

Fixed Costs
Costs that generally do not change directly with the number of products or services sold in the short term.
Variable Costs
Costs that change as the amount produced or sold changes.

Cash flow

Money needs to move at the right time.

Cash flow is the movement of money into and out of a business.

  1. Cash inSales, customer payments, other money received.
  2. Business
  3. Cash outSuppliers, wages, rent, other expenses.

A business needs enough cash available at the right time to pay its expenses and continue operating.

Budget planner

Give every dirham a purpose.

A budget is a financial plan that estimates expected income and spending over a period of time.

Expected money in

AED
AED
AED

Expected money out

AED
AED
AED
AED
AED

Money helps you make decisions

The numbers tell you something.

Price

Are we charging enough to cover our costs while remaining suitable for customers?

Spending

Where is the business spending money, and are those expenses necessary?

Growth

Does the business have enough financial resources before investing or expanding?

Key takeaway

Revenue is the money a business earns, while costs are what it spends. Understanding profit, loss, budgets and cash flow helps a business monitor its finances and make more informed decisions.