Business Credit & Capital No Comments

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Overview

Every business is going to have unexpected expenses come up from time to time. It is important that a business is prepared for these expenses. There are plenty of ways to plan for these expenses throughout the course of the year. The best way for a business to be prepared for unexpected expenses is to be in a solid financial state. Having a nice emergency fund in the bank and a high credit rating can go a long way in getting out of a financial jam. Here are several ways to budget for unexpected expenses as they occur.

Have an Emergency Fund

An emergency fund is usually several months of expenses in the bank for a business. There are many different benefits to having this money set aside for when unexpected expenses do occur. First of all, this can help to prevent a company from having to borrow money at a high rate of interest to make a quick payment on something. In addition, this money can be used when business opportunities do come up. For example, in the most recent recession many companies with large amounts of cash bought out other companies for pennies on the dollar. If your company does not have a lot of money in the bank, it is important to have some sort of emergency fund for unexpected expenses as they occur.

Plan Ahead

When making a budget, it is important to plan ahead for the events that can happen during the course of business. Many business owners are caught off guard by certain expenses as they come up. For example, if the company car has to have its tires changed, many people would consider this as an unexpected expense. However, every car owner should understand that changing the tires every so often is simply one of the responsibilities in owning a vehicle. Anyone who is trying to plan ahead can use various software tools that are available online or in a downloaded form.

Credit Score

The credit score is an important part of being in business. There are going to be times when a business has to borrow money to get started or to get through a rough patch. Having a high credit score can do several things for a business. The most important is that it shows banks that your company has been good with money in the past and can be trusted in the future. The interest rate on the money borrowed will also be lower with a high credit score. Always keep the long term in mind when dealing with borrowing money. If you do not have an emergency fund yet, it may be necessary to borrow money to get out of a financial situation.

Budget for the Unexpected

No matter how well a business plans ahead, there are always going to be times when the business has an unexpected expense. One of the best ways to deal with this is to simply give a percentage of the budget over to unexpected expenses. For example, a company may say that one percent of all sales are going to go towards unexpected expenses. Over the long term, this can really add up to a lot of money in an emergency fund or other account. This can help to pay off any issues quickly and easily as they come up. Always budget for an unexpected event to occur, and use the months where nothing happens to save up money for those unexpected events.

Conclusion

Running a business means that there are going to be uncertain financial times. There are always seemingly random expenses that are popping up each month in a business. It is important to be on a strong financial footing while in business. Having a large emergency fund or high credit score can go a long way in dealing with unexpected expenses as they occur. In addition, use the free budgeting tools that are available online in order to plan out expenses before they occur. If you must borrow money, it is important that the credit score of the business is as high as possible. This will reduce the cost to borrow money over the long term.

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