How to manage expenses that are not budgeted
Unforeseen expenses need to be foreseen. Behind this seemingly absurd phrase lies an unfortunate truth: expenses not provided for by the budget are inevitable for any company. Force majeure, unexpected investment opportunities, price increases, forced contractor changes are the reality of any business. It is impossible to build business processes so that costs never arise; which means that you need to learn to live with them.
Large companies usually allocate a fixed amount for a significant period, which should cover all expenses for a certain activity – for example, a budget for covering PR-expenses for a year. Exceeding this amount is extremely undesirable, therefore, ordinary managers have the task of optimizing costs.
Budget for expenses that are not in the budget
Can I plan unforeseen expenses in advance? Not only possible, but necessary. Financial advisers advise any business to have a stabilization fund – a kind of financial “pillow” in case of costs. By the way, not only commercial structures use this decision: since 2004, the state has such a fund.
The recommended size of such a “pillow” is the sum of expenses for three months, and it should be stored in highly liquid assets. It can be cash, short-term deposits, bonds and the like.
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Such a fund is usually available to all large, medium and most small businesses. At micro-organizations, it is often absent, or its size is insufficient to cover large costs. The source of funds for unforeseen expenses can also be the profit of the company in the form of the owner’s investment. Unfortunately, the owners of micro-organizations most often do not have enough savings themselves (or simply do not want to share). In such cases, you have to turn to special methods.
Where to get the money
There are a huge number of approaches to work with expenses over the budget. The choice of a specific solution depends on the scale and type of business, its structure and the specific situation. We will consider the most universal methods that “work” for most cases.
Since it is best to study these tools in action, let’s take for example a small IT agency consisting of five employees, which suddenly turned up a very promising project. The project promises great benefits in the future, but to launch it you need to hire a specialist. And it seems that the specialist was found and ready to go to work at least tomorrow, it remains only to purchase equipment for him in the amount of 200 thousand rubles – but the budget does not have these funds, as well as the stabilization fund and the owner. How to be
Management decisions
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The first option in such a situation is to make a management decision to change cash-flow, making sure that the company’s income over a certain period of time exceeds the cost. In our case, an agency that usually works on a post-pay basis is trying to negotiate an advance with a client in order to purchase equipment for the new employee with this money. Of course, this is a certain risk: an advance automatically obliges you to do the job well and on time – but then you get funds that you can invest in the project.
If the customer does not agree to such conditions, you can go to the second option and try to agree already with a specialist – for example, that he will temporarily work from home from his computer. If the new employee’s own equipment leaves much to be desired, we proceed to the next method.
