As a small business owner, one of the crucial things you must do is to get a perfect grip on your cash flow. Effective budgeting and proper cash flow management are both essential tools for business success. However, failure to take into account all the operations costs is a common mistake most startups and even medium-sized businesses do.
According to Asteria, unexpected business expenses are the top reason for financial hardships in business. It’s recommended to account for the following business expenses when creating your budget.
1. Equipment maintenance and repairs
All businesses require different types of equipment. For instance, computers are used in almost all business settings. Regardless of how effectively you research the equipment you buy, it won’t last forever. It will require regular maintenance and repair along the way, and you must account for such expenses.
2. Cybersecurity
Given the advancements in technology and the ever-increasing cybercrimes, all businesses must be prepared for the threat of data breach. Regardless of how small, or big your company is, you can be a target. While giant corporations might be targeted because they generate a huge amount of revenue, some hackers perceive small businesses as an easy payday. Therefore, your business isn’t immune to the threat of data breach.
Attribute a portion of your business budget to cybersecurity to protect the future of your business and also comply with the necessary regulations. Failure to take this precaution might cost your company a huge amount of money in the future.
3. Utility problems
You may experience unexpected expenses in your business when you have utility problems. This could be faulty electrical installations, blocked toilets, and more. If the problem arises at an inconvenient time, for instance, on a weekend or holiday, you could face extra charges from the repair company. Besides, every minute spend while your business stays closed due to these utility issues is wasted income.
4. Unexpected business opportunities
Not all additional business expenses arise from negative situations. Some additional costs come about when your company is presented with opportunities it wasn’t expecting. Well, opportunities are likely to make more income for you in the future but they need upfront investment. You need money to take advantage of them. This is the reason you must account for opportunities in your budget and manage your cash flow perfectly.
5. Business growth
Every business, big or small, aims at growing bigger and generating more revenue. But do business owners account for the growth expenses? You need to invest in employee training, new equipment, hiring additional workers, and other elements of business growth. If these costs aren’t budgeted for, the chances are that your business will be always in financial problems.
6. Legal-related fees
Ensuring your contracts are in order is important for a smooth running of your business. Understanding legal jargon in business contracts is an uphill battle for most business owners, and a slight mistake might cost your business money or have devastating problems in the future. This is the reason you must hire a legal advisor to take care of all legal-related issues. Legal fees, especially if you need such services frequently, can quickly add up and cause business financial difficulties if you don’t budget properly.
7. Payment delays
These are not direct expenses where you offer someone money for a service or good. However, payment delays are costly. Note that your business cash flow depends on your debtors and customers sending timely payments. When these stakeholders are slow to pay or some of them don’t pay, your business loses money.
It is, therefore, important to avoid late payments by perfectly designing your invoicing process and terms of service. You should also follow up with all the late-paying clients. When budgeting, don’t assume every customer will pay in time. So, give yourself some financial cushion to manage late payments.
Some of these expenses are inevitable. So what happens in case you don’t have adequate capital to cover them? Probably you have heard in the news or even experienced first-hand that it’s getting harder to secure financing from most traditional lenders. Fortunately, some lenders such as Asteria still provider personal loans and salary loans to help people cover different expenses.
