Broken equipment, energy bills, building repairs – there are plenty of unforeseen business expenses that can pop up when you least expect it. If you haven’t planned or budgeted for these unpleasant surprises it can have an impact on your bottom line.
Here are some tips to prepare for and handle these unexpected expenses when they come your way.
Emergency Funds
You won’t need it until the worst happens. People who haven’t experienced the pain of a hefty unforeseen business expense may see an emergency fund as a waste of capital. Shouldn’t that money be put into business growth and expansion? It definitely could! However you’ll be thankful you put some of that money aside for when or if disaster hits. Having an emergency fund will prevent you having to borrow money at a high interest rate and getting into unnecessary debt.
Always plan for the future
Budgeting isn’t the most exciting part of business, however it’s crucial. When budgeting, ensure you cater for the unexpected to occur so you aren’t caught off guard when it happens. For example, if the rent in your office building goes up, many would consider this an unforeseen business expense. However if you’ve planned ahead, you would build the possibility of a rent increase into your yearly expense forecast and budget. Set a percentage of your budget aside to cover these costs.
Make a list of potential surprise expenses
Some of the unforeseen business expenses you’ll encounter are more obvious than others. Take the time to map out what unforeseen expenses your business may be lumped with. Each business will have different expenses depending on the industry they operate in. worth working with an expert in your field to get their insight into expenses they’ve encountered that you haven’t considered. Here are some of the nasty surprise expenses to look out for:
· Permits
· Insurance
· Equipment maintenance
· Professional fees
· Employee salaries
· Invoice delays
· Taxes
· Credit card fees and interest
· Asset shrinkage
To prepare for some of the above, keep an eye out for the best policies, payment terms and deals that will help you when the time arrives.
Final Thoughts
Paying bills and expenses is never a great feeling, and it’s made even worse when the expense is unexpected.
Use the above tips and ensure you always review your current expenses to see where you could save additional funds and what assets are costing you the most. Saving a dollar here and a dollar there will come in handy for your next unforeseen expense.
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