Unexpected Costs Every Business May Face
In today’s global marketplace, there’s ever more pressure on businesses large and small to cut costs in an effort to remain competitive. But sadly, the smaller the margin for error, the more likely it becomes that one major setback could spell disaster for the company as a whole. Like so many things, however, the more prepared you are and the better your planning has been, the better equipped you are to handle the inevitable. Here are some of the key areas to consider.
Whether it’s the company office space, vehicles, or electronics, few things you buy actually come with a once-off price tag! Investing some of your profits in an interest-bearing account that you can draw on for unexpected costs is an excellent idea, no matter what industry you serve.
Monthly services like refuse removal, water, other municipal rates, and energy costs might also seem perfectly logical, but it’s one of things that are so obvious they get overlooked surprisingly often.
The true cost of employees
They may be your biggest asset, but one area companies seldom budget for correctly is the cost of their staff. It’s tempting when working out your annual budget to calculate the cost of employees as their salaries alone – but this is never actually the case. From predictable expenses like taxes and unemployment fund contributions, to less predictable costs like training and courses, travel allowances, and even seemingly petty costs like tea and coffee for the office, it can pay big time to put a decent safety margin (around 25 to 35% is ideal) on employee costs in your budget.
Frivolous lawsuits, disputes with employees, a supplier or customer reneging on a contract – all these things are real possibilities for any sized business. And while partnering with an excellent boutique law firm that you can keep on retainer is a relatively minor monthly expense, it’s still tempting to believe ‘it will never happen to me’. And it might not – but could your business survive a protracted legal entanglement if it did? Like insurance, this is definitely not a lesson you want to learn the hard way!
With the rapid pace of advancement in technology, factoring in the need to upgrade or update both physical hardware and software should be something you look at seriously. Any technology that makes your employees more productive, improves your customer service or helps you cut costs can pay for itself very quickly – but only if you’ve allowed room in your budget for the initial cost.
While very small companies might be able to handle their taxes on their own at first, the larger your business grows, the more risky it becomes to continue to do so. An expert tax consultant can do more than keep you out of trouble and prevent nasty surprises; they can also offer advice on where you might be eligible for rebates and refunds – so this is definitely a service worth investing in.
Delayed payments and defaulting customers
Ah – the bane of every business – customers who fail to pay on time, or even at all. With the best will in the world, sometimes people who owe you money simply can’t (or won’t) always pay you when you expect them too. You can try and limit this possibility as much as possible by having your payment terms clearly outlined and agreed to in writing, and making sure any contracts you have with third parties are legally binding, as well as building a safety ‘cushion’ into your monthly budget. Innovative cashflow and income protection services for businesses are becoming more readily available, so if your company is highly dependent on getting your monthly receivables in on time, it’s definitely worth investigating the options available to you. Having a readily available line of credit for real cash flow emergencies can also be a good idea, as long as the repayment terms are fair.
Cybercrime and data security
With so many businesses reliant on their online presence and client data, making sure you take the best steps possible to protect them is vital. If your business couldn’t absorb the costs of a hit, then it’s crucial to have insurance in place that will.
Using your current monthly expenses and projecting them into the future indefinitely can be a misstep too. If you’re taking on new staff members, moving into larger premises or investing in better equipment, this can have a major knock-on effect when it comes to your bottom line.
You can’t be prepared for every eventuality – but covering as many bases as you possibly can is never a bad idea!