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FinTech Glossary

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Variable Costs

Definition

Variable costs are business expenses that change in proportion to activity levels, such as sales volume, production output, or service usage, unlike fixed costs that remain constant.

Examples of Variable Costs

Common variable costs include:

Transaction fees
Logistics charges
Utility consumption
Usage-based software costs

These fluctuate with business operations.

Why Variable Costs Matter

Tracking variable costs helps businesses understand unit economics and profitability. Poor visibility can hide inefficiencies and impact margins.

Business Relevance

Spend tracking and categorisation help finance teams monitor variable costs and optimise budgets.

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