Wealth Management

How Do Businesses Handle Unforeseen Expenses?

unforeseen business expenses

Most businesses work to a tight budget, which means that an unforeseen expense can put a spanner in the works and create a difficult financial decision for businesses. Broken equipment, an unexpectedly high energy bill or building repairs are just a few expenses that can occur and can have a negative impact if they have not been planned for. So, what are a few ways that businesses handle unforeseen expenses?

Consider What Expenses Might Arise

First, you should make an assessment to determine what unexpected costs might arise for your business. Unforeseen business expenses will vary depending on the industry, but can include things like office supplies, equipment, building repairs and maintenance and health and safety. Once you have an idea of what kind of expenses you might have to face, it will give you an idea of how high the risk is and how expensive it could be.

Build an Emergency Fund

One of the best ways to prepare for these unexpected costs is to build an emergency fund. This way, if an issue arises then you can get immediate access to the money without having to borrow from anyone else. You can build an emergency fund by diverting a percentage of income into a separate, easy to access account that is only used for emergencies.

Cash Flow Financing

In the event that you might need to consider funding, you will find that there are a few options available. Funding is common and can be required when you have not had enough time to build up a sufficient emergency fund or if your fund will not cover the expense. Cash flow finance is a good solution in these situations as it is unsecured and based on your forecasted cash flow, which means that you can even out seasonal peaks on your cash flow. You can get quick access to the money and it can be an easy way to manage large unexpected costs.

Insurance & Warranties

Businesses also need to make sure that they have sufficient insurance in place. Many unexpected expenses that occur could be covered by insurance, which will  mean that you are not left out of pocket and in a difficult financial situation. Additionally, areas like equipment breakdowns can often be resolved with warranty protection so you should always check the warranty when investing in machinery and equipment. 

Hopefully, this article will encourage you to plan ahead when it comes to unforeseen expenses. Without planning, an unexpected cost can cause a great deal of disruption and impact your bottom line. Planning ahead will not only protect you financially but will also help to provide peace of mind and ensure that something like faulty equipment does not cause a huge amount of stress for you.

Related: How to Save Money from Household Expenses

CEO & Editor
I'm Ved Prakash, Founder & Editor @Newsblare Media, specialised in Business and Finance niches who writes content for reputed publication such as,, Motley Fool Singapore, etc. I'm the contributor of different... news sites that have widened my views on the current happenings in the world.

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