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Wouldn’t life be easy as a business owner if you could predict everything that was coming your way? Unfortunately, it is rarely this straightforward, and one thing you do need to be prepared for is unexpected expenses. Of course, being prepared for the unexpected is never easy. However, you can ensure your business is positioned so that any unexpected expenses don’t spell a complete disaster for you.
UNEXPECTED EXPENSES BUSINESSES NEED TO BE PREPARED FOR
- Legal expenses – It does not matter how honest your business is; there could come a time whereby someone targets you. It does not matter whether you are innocent are guilty, you are still going to need to pay some money towards legal fees. Needless to say, this isn’t something that should be happening on a frequent basis, but it is something a lot of businesses have the displeasure of experiencing at least once.
- Late payments – While this is not technically an expense, it can lead to further expenses. For example, if someone does not pay your business on time, this could lead to overdraft charges for you because you need to dip into funds that you don’t have.
- Equipment failures – You need to be prepared for any failures with regards to your equipment, as well as anything else with regards to the functionality of your business and your office space in general. For example, one of your computers may break, your AC may need to be replaced, or you may need to have your water tank pumps replaced. A repair or replacement like this could be needed at any time.
HOW TO PREPARE FOR UNEXPECTED BUSINESS COSTS
- Have an emergency fund – There is only one place to begin, and this is by establishing an emergency fund. In most cases, this will amount to several months of your total business expenses, which are set aside in a separate bank account for a rainy day. This will ensure your business can immediately react to anything that happens. It will also mean that you do not have to revert to lending money as soon as you have an unexpected expense.
- Manage your credit score – Managing your credit score is of paramount importance for any business. You need to have an understanding of what your current credit score is, and you must know what factors influence your credit score. For example, this includes the likes of the age of your credit accounts, the total amount of credit you are using compared to what is available, and so on. Managing and improving your credit score is important because you need to maintain a good score to ensure you will be able to borrow money if you do find that you need to.
Preparing for the unexpected is important for any business owner. Unexpected expenses could spell a disaster for your business if you do not have an emergency fund and you haven’t managed your credit score well. Use the tips mentioned above to get started.