If you are thinking about opening a business and don’t have any management skills, you should know that money making ventures tend to be very unpredictable. This is especially true when it comes to finances. You can prepare a budget for a specific undertaking, but as you’re executing the project, you find out that the money is not enough. Below are some of the unexpected expenses and some of the ways that you can use to avoid them:
You may want to renovate the office space to give it a new energy. Before you do that, you may prepare a budget of the things that you want to include such as a waterproof ceiling tile and LED lighting. However, when the renovation begins, you discover that the wiring behind the walls needs to be updated. Alternatively, the water piping could be cracked from the inside. This forces you to spend more than you had planned for. To avoid such costs, make sure that you hire an experienced building inspector to properly check the building. They might be expensive, but they will save you from the unexpected renovation costs.
You may know how much you need to spend for your next inventory purchase, however, during the actual transaction; you discover that you have to buy more items because they are no longer available. In many cases, your inventory doesn’t match your sales because of shoplifters, invoice and billing errors, and shady dealings. You can avoid these expenses by investing in an effective inventory management system that gives you up-to-date information on what goes in and out of the business. That way, you can keep track of everything.
There are times when you will have to provide goods to your customers on credit. If they have been loyal to you for a long time and you know their history, paying back won’t be a problem. However, the mistake that you can make is assuming that they are going to pay you back on the stated date. Life is unpredictable and trusting people so much can lead to unexpected expenses. This is why you have to be careful on the deadlines that you set for paying back certain amounts. It’s preferable that you give debtors 2 weeks to pay you back so that you can avoid these expenses.
You might have invested thousands of dollars into getting the best anti-virus and firewalls for your system. Then, you become a victim of a cyber-attack because hackers found a weakness in your system. Cyber security measures aren’t always guaranteed. This is why you should consider getting insurance for it. That way, you don’t have to spend a dime when an unexpected cyber-attack happens.
Use the above strategies to avoid unexpected expenses. As you do so, you should also keep track of your current expenditure since all cash flows matter.
Emma is a business strategist-turned blogger. She lives in Auckland, New Zealand. Emma is a passionate traveler and yoga aficionado. She is in love with coffee, interior design, books, and good vibes. 🙂