Running a business is expensive. Payroll, upkeep, rent and supply costs all add up quickly. Good accounting is essential for any company that wants to maximize its spending ability and make sure it has enough money to handle regular expenses.
However, some things are often overlooked — and can be a serious problem if they blindside you. Fortunately, you can have the resources you need to manage these costs more effectively with the right prep.
Here are six common expenses that your business should be planning for.
1. Permits and Licenses
Your business will probably need at least one or two permits or licenses to operate. For example, if your company uses flammable materials — or if your premises will be open to the public — you may need a permit from the fire department to operate. In most states, you’ll also need a license if you want to put a sign up. Many of these permits will require both an upfront payment and regular renewal costs.
Good research on local, state and federal regulations can help you prepare for many of these expenses. Most of the time, information on how much a permit or license will cost to obtain or renew is available publicly. Keeping extra money on hand can also help prepare for the ones you may not have planned for.
2. Data Loss
Any company that relies on data — like customer contact information or sales information — is susceptible to loss. This can be seriously expensive. According to one study conducted by the Princeton Review, businesses lose an average of $141 per record lost.
Often, data loss is caused by cyberattacks that breach company networks in an attempt to steal their info. Server crashes and equipment issues are other sources.
You can prepare for these threats with good security practices and regular checkups on the health of your business’s hardware. However, even with the right preparations in place, your business can still fall victim to data loss. It’s smart to take other precautions, like putting aside money for backups of critical data, that can help your company continue operating after a breach.
There are hundreds of ways for a business to make money. No matter what your company does, it will probably need some kind of advanced equipment — whether that’s heavy machinery or laptops and network servers.
Over enough time, some of this machinery will fail and need to be repaired or replaced. Regular maintenance helps, but you can’t always see equipment failure coming. If you budget for replacements, you can be ready for damaged or failing items. Budgeting for new equipment can also make it easier to upgrade when advanced tech becomes available.
4. Building Upkeep
Owning a building is a less common arrangement than renting, but it has a few distinct advantages and disadvantages. It means you’re fully responsible for its upkeep. There are a lot of things that can go wrong with a building, and you’ll want to keep some money on hand for emergency repairs and general maintenance.
A good upkeep schedule with regular checkups on building systems will cost you — but it can also help avoid some of the expenses caused by failing equipment. A clogged filter in your building’s HVAC system, for example, can negatively impact its performance and cause extra wear and tear. Impurities in your local water supply can damage your boiler system over time.
If problems like these slip under the radar long enough, they can lead to costly equipment repairs — or even serious damage to the building itself. Putting aside some money for both maintenance and general emergency upkeep will help ensure systems remain in working order.
5. Accounting Mistakes
Even the most well-prepared businesses will probably make a bookkeeping error or two eventually. Failing to account for recurring costs — like dues, subscriptions or office supplies — or mistakes in calculating cash flow, debt or equity can leave you with an inaccurate idea of how much money you have available.
When budgeting, it’s a good idea to give yourself a bit of a buffer to handle any overlooked costs. Running your business wit the tightest possible margins may be efficient, but it’s often a better idea to have a little bit of cushioning in case of accounting errors.
6. Demand Spikes and Rapid Growth
It’s normal for businesses to go viral overnight — or for customer habits to rapidly shift, causing demand for certain goods to spike unexpectedly.
Situations like these are almost entirely good news for the businesses they affect. However, rapid growth and demand spikes may mean you’re suddenly faced with more requests than your company can handle. Online storefronts may not have the resources they need to deal with all customer requests, and your support team may be swamped by the number of tickets they’re receiving.
A rainy day fund with money put aside for more equipment, resources and training for new hires can help your business gracefully manage these kinds of growing pains.
Common Expenses Every Business Should Budget For
Good budgeting is key to keeping any business running. There are a few expenses that tend to blindside companies and can be especially painful if they aren’t prepared for. Permits, data loss, equipment issues and bookkeeping errors can all come out of nowhere. Budgeting some extra money for these things can help ready your business for the worst. Maintaining a buffer will also help you keep up with any sudden spikes in demand.
With a little foresight and preparation, your company can be prepared for any unexpected costs.
Lexie is a UX content strategist and web designer. She enjoys copious amounts of coffee (with a dash of milk) and walking her goldendoodle. Check out her design blog, Design Roast, and follow her on Twitter @lexieludesigner.