Understanding the difference between fixed costs and variable costs is essential for running a profitable WooCommerce business. These two types of expenses behave very differently and have a major impact on your pricing, profitability, and long-term financial stability. In this tutorial, we’ll explain how each cost type works and how the ProfitBlue Financial Reporting Plugin helps you calculate and manage them automatically.
What Are Fixed Costs?
Fixed costs are expenses that stay the same over time, regardless of how many orders you receive or how much you sell. They are predictable, recurring payments that keep your business running.
Common examples include:
- Rent for your office or storage space
- Monthly software subscriptions
- Salaries and administrative costs
- Insurance or accounting fees
If you pay $100 for rent in January, you’ll likely pay the same in February and March — even if your sales triple. Fixed costs don’t depend on order volume, which makes them easy to plan but harder to reduce in the short term.
Inside ProfitBlue, you can add fixed costs through the Data Settings → Custom Cost and Income section. Simply enter the cost type (for example, “Office Rent”) and the amount, assign a date range, and save it. ProfitBlue automatically includes these values in your Profit & Loss (P&L) calculations each month.
What Are Variable Costs?
Variable costs change based on your sales volume. The more you sell, the higher these expenses become. They scale directly with your order activity and are usually expressed as a percentage of your revenue or a fixed amount per order.
Typical variable costs in WooCommerce include:
- Shipping and fulfillment costs
- Payment gateway fees (Stripe, PayPal, etc.)
- Wrapping or packaging materials
- Advertising or affiliate commissions
In ProfitBlue, you can set variable costs as either a percentage of revenue or a flat fee per order. For instance:
- If you set 10%, and an order generates $100 in revenue, ProfitBlue records $10 as a variable cost.
- If you set a fixed value of $10, then every order, no matter its size, adds $10 to your total variable expenses.
These figures are then automatically calculated and deducted from your gross profit in real time.
Fixed Costs vs Variable Costs: The Key Difference
The difference between these two cost types lies in how they behave as your business grows:
- Fixed costs stay the same month after month.
- Variable costs rise or fall with sales volume.
In ProfitBlue’s Profit & Loss report, this relationship becomes clear. Your revenue is first reduced by COGS (cost of goods sold), then by variable costs, then by fixed costs. The remaining figure represents your Earnings Before Tax (EBT) — and after subtracting income taxes, you get your Net Profit.
Understanding these layers helps you manage your finances better, forecast your cash flow, and decide when to scale or cut back.
Why Monitoring Costs Matters
Even though the formulas are simple, keeping track of costs can quickly become complex when your store grows. You might end up managing dozens of expenses — from packaging to marketing — and missing small inefficiencies can add up fast.
That’s why it’s important to check your cost structure regularly in ProfitBlue. The plugin provides a clear, automated overview that shows how your costs evolve, so you can prevent financial problems before they happen.
Final Thoughts
Fixed and variable costs form the backbone of every financial report. Fixed costs keep your store running, while variable costs move with your sales. By tracking both in ProfitBlue, you gain accurate insights into your WooCommerce store’s profitability and can make smarter, data-driven decisions every day.