Unexpected Business Costs: How to Prepare for Them

Unexpected Business Costs: How to Prepare for Them

 

It happens to the best of us. No matter how prepared we think we are with managing business expenses, some costs just seem to pop up unexpectedly.

When a computer breaks down or a trusted employee leaves, these emergencies can be quite challenging if you’re not prepared for it.

Not all business costs are unexpected; some may have been overlooked. One thing is for sure, underestimating these costs is one of the key factors why a business will fail, so it’s important to know  what they are to equip your business for long-term success and growth. Here’s a rundown of unexpected business costs that are often overlooked by business owners:

 

5 Unexpected Business Costs and How to Prepare for Them

 

  1. Equipment Breakdown and Maintenance

            

Depending on the nature of your business, an equipment can be a convection oven (restaurant), a drilling machine (construction) or any tools you need to produce a product or perform a service. Small office equipments like desks, chairs, computers and printers are often overlooked so be sure to add them in the equipment budget.

 

How to Prepare for this cost:

You don’t have to buy the latest model if there is no need. There is nothing wrong with used items as long as it gets the job done. eBay, Carousell and Hardwarezone Marketplace are some of the best places to buy second-hand items.

However, it would be a good idea to have it examined first by a professional to check for any repairs or maintenance issues that you need to be aware of.  In that way, you can set aside an emergency fund to prepare for equipment repairs or upgrades in the future.

Some electronic retailers like Apple offers AppleCare+, a mobile protection plan that covers iPhones. It allows you to extend coverage for repairs and replacements for up to two years, including software and technical support. Compare that with buying a new phone as a replacement, which could turn out to be more expensive.

 

  1. Utilities

    Utilities CostFor those renting space from an old building, chances are, you might run into some issues with electrical wirings and plumbing ever so often. So, before renting an office space, find out how much space your business needs to work with and grow in the future first. Does it require more than what a home office can offer? Perhaps a temporary office space may suffice especially for startups.

 

How to Prepare for this cost:

If you’re not sure how much space you’ll need in the future, why not try renting shared coworking spaces like Collective Works? It has all the basic amenities like WIFI, coffee,  meeting rooms, that are shared among coworking tenants.

You can also check if your utility providers offers budget-friendly options such as budget billing, flex-pay and energy audit processes to review if your business is implementing energy-efficient technologies that might save you money on utility cost in the long run.

 

  1. Employee Benefits

    Employee Benefits For businesses to thrive in this competitive economy, it’s a must find and retain the best employees. Employees’ salaries, health insurance, vacation and medical leaves, and training expenses should be factored in  well within a company’s budget. Failure to invest in your employees can result in a huge employee turnover.

 

How to Prepare for this cost:

So how can you make sure that you don’t lose significant amount of money due to employee turnover? Don’t assume that all your employees are happy.

Create a working environment that promotes honest feedback among employees. Providing perks like a health plan, casual dress codes, flexible work schedules and telecommuting can encourage retention of productive employees.

Shop around and negotiate for the best rates from different health insurance providers to get the best rate.

 

  1. Shrinkage

Shrinkage CostShrinkage refers to the loss of inventory most likely caused by employee theft, shoplifting, vendor/supplier fraud, product damage while in transit and cashier errors. According to a 2014-2015 study done by The Global Retail Theft Barometer , shrinkage costs $123.4 billion for 24 countries under review.

 

 

How to Prevent the Shrinkage cost:

To prevent or minimize shrinkage, use a smart inventory management system. This is to get an insight of your company’s shrink performance and source tag items from raw materials to consumer products.

Conduct a pre-employment background check to screen potential employees for any dishonest theft records. Invest in loss-prevention solutions such as CCTV  cameras and trainings for employees in preventing theft in stores.

 

  1. Government Fines

Government CostIt goes without saying that all business owners should operate within the law. But even so, mistakes can happen from time to time. Maybe your company failed to file taxes on time or meet the necessary safety standards as required. Whatever that might be, the government might impose a fine if you violate your country’s laws.

 

How to Prepare for this Cost:

Fines may range from a few hundred dollars to thousands. It’s important to have enough funds to cover these costs should anything happen. Make sure that your company is aware of its legal obligations to vendors, employees and customers.  All internal and external policies should be strongly enforced to prevent any legal repercussions.

 

  1. Delays in Payment

Delayed PaymentBusinesses may also suffer when products or services were fulfilled but payments were delayed.  Payment delays will seriously impact a company’s income, as they are necessary to pay costs like manpower and utilities. Unfair as it sounds, businesses are still required to update all expenses on time even if customers delay their payment.

 

How to Prepare for this Cost:

Most small businesses don’t have a deep cash flow to wait for payments for products or services that were already fulfilled. In this case, hold your customers accountable to payment terms. Don’t hesitate to charge late fees if customers failed to pay on time. You can also discuss options with your bank on ways to protect against bounced checks or overdrafts.

 

Get Ready at any Cost

As the old quote goes, “hope for the best and expect for the worst”, every business owner should brace for the best and worst scenarios. A business venture is nothing but a series of uphill battles and those that prepare will most likely come out victorious and successful.

By understanding these unexpected business costs, you are in a better position than most businesses that don’t. What other hidden business costs should we add to this article? Let us know in the comments below.

 

About Vodien

Since 2002, we are the largest ICANN-accredited managed web hosting provider based in Singapore. We offer a wide range of enterprise-grade and secure hosting solutions: domain, web, VPS, private cloud, dedicated and colocation hosting and content delivery network(CDN). If you want to grow your online business, make sure to get in touch with our customer service staff by clicking on the link below.

Vodien Singapore 24/7 Web Hosting

Facebooktwittergoogle_pluslinkedinmail

Leave a Reply

Articles in Picture

Singapore’s Best

Vodien offers the best Singapore web hosting experience around with the best shared web hosting plans, dedicated servers, and VPS plans.
Vodien SuperSupport