Business
As a business owner you are bound to have unexpected expenses come up at some point, but are you ready for it? How do you prepare for unexpected business costs? These costs could be big or small and being prepared to take any kind of financial hit is something that we want to prepare for as best we can. We’re going to discuss how you can ensure you’re not only prepared for costs throughout the year, but how to save for the rainy day that could pop up. It’s time to prepare for the unexpected! What we’re talking about Foreseeing Unexpected Costs What Costs Will Impact You? Pre-Thinking About Your Solution The Importance of Building A Savings Foreseeing Unexpected Costs One of the best ways to prepare for unexpected costs is to foresee them coming. If you thought I was going to say save, then I’m sure you’re surprised by my strategy. Although saving is great and should be a part of your business, if you can’t save right now, then foreseeing expenses is going to be your starting point. Make a list of all of your annual, bi-annual and every 2 year expenses. If you are using an bookkeeping software, then enter these expenses into your system and do so in advance of when the payment will be due. This will give you cushion room because you know these expenses are upcoming. You will be able to see the impact on your bank balance and utilize this as a cash flow tool. What Costs Will Impact You? The next way to prepare for unexpected expenses is deciding on what expenses would actually impact you. Create a list of all kinds of expenses, both big and small from a phone charger to a new laptop. Decide what your cost threshold will be. What kind of costs will make you feel stressed or unprepared? Identify these costs and the type of expenses that could come out of them, then decide which expenses would actually be necessary for you to run your business. Pre-Thinking About Your Solution The last step to preparing for the unexpected is to pre-think about the solution. You shouldn’t think about the solution only when the cost arises. our first time thinking about the solution to this unexpected expense should not be when it first happens. One solution for an expense such as needing a new laptop would be to utilize an old one until you can afford a new one. Consider different ways you could handle the same situation. Come up with solutions that cost money or don’t and figure out what our options might be instead of waiting for your actions to be activated financially. The Importance of Building A Savings Let’s also talk about savings. You should already be saving for your taxes as long as you have a profit, but you should also focus on building your business emergency fund. I’m a fan of diversifying my savings model and automating it through my bank. You can do this on a weekly, monthly or bi-weekly basis. Build a cash reserve in your business. There are two methods to savings. The first is through your bank with large, substantial amounts on a monthly basis. This would be macro-savings. The other method is to micro-save through savings apps, such as Qapital or Digital Savings. Micro-saving is saving smaller amounts such as $0.60 or $3 per day. I am a fan of pairing macro-savings with micro-savings! Are you building a cash reserve and preparing for the unexpected? LINKS MENTIONED Qapital savings app andismiles.com/qapital Digit savings app andismiles.com/digit Episode 24: How do I save more in my business and when should I invest? https://andismiles.com/podcasts/e24/ How To Build A Business Emergency Fund Quickly And Easily https://andismiles.com/2019/04/10/business-savings/ How to Save in Your Business Even if You’re Broke https://andismiles.com/2018/04/09/how-to-save-in-your-business-even-if-youre-broke/ How to Automate your Tax Savings with Qapital https://andismiles.com/2017/08/14/automate-tax-savings/