Hidden business expenses are costs that are difficult to predict.
Such costs can sink a young business, so every effort should be made to
anticipate them. In any event a contingency sum of about 20% of sales revenue
should be set aside to meet the unexpected. If you have anticipated every cost
then you have a useful reserve to go into the next financial year with. The
list below covers some of the most common hidden expenses:
The legal costs of incorporating your business. These can range
from a few hundred to a few thousand pounds
Insurance costs to protect business assets and provide public
liability insurance, this covers people in your office or factory. If a visitor
or someone who works for you is injured on your premises then you are
liable.
Insurance to cover the cost of dealing with a VAT or tax
enquiry. If the tax authorities are either unhappy with your accounts or pick
you out at random for a full inspection, you will have to meet substantial
extra costs for accountants fees. Without insurance these will fall to
you
A bad debt occurring if a customer fails to pay or is unable to
pay. Accounting rules allow you to show as income any invoiced amounts, but
that does not always mean the money will actually arrive
Meeting fines on the business for such items as unfair
dismissal
Registering patents, copyrights and trade marks to protect
intellectual property
Goods in transit insurance to cover your products on their way
to a customer
The cost of providing for the replacement of fixed assets.
Although items may be new when you start out in business, one day they will
have to be replaced
Petty cash transactions for stamps, taxis and so
forth
Many other hidden expenses are known in name but not in amount. For
example, until your quarterly telephone bill comes in the exact amount is not
known. You do however know that the telephone is being used. The same is true
with heat, light, power, fuel, and vehicle maintenance. A process known as
'accruals' deals with these hidden expenses. It is possible to make provision
for these in your accounts to meet costs when they become due.
