How do you manage unforeseen expenses?

It is true that we cannot always stick to what has been planned or budgeted. There are instances where printers breakdown all of a sudden which now requires immediate repair. As a business, you must have budgeted for it but what happens if the printer becomes unrepairable. It might not be feasible for you to go to stationery shops to get the printouts and you won't be left with an option other than to buy a new one. But, the question is how? 

And, believe me! A month doesn't pass by where such unforeseen expense requests/invoices do not appear on your desk for approval.

As a business, we should always be ready to manage these. Here's what we suggest:

1) Establish a CONTINGENCY FUND: You can decide the % considering the past trends but we would recommend it be around 2-5% of the total monthly income. Ensure that it is kept separately in the reserve account so that you don't have to borrow or take a loan from the bank to meet the immediate needs.

2) Add a 5-10% buffer/cushion on your monthly OPERATING Budget for these sudden expenses which are not part of the original budget.

3) Review your current Expenses and find savings to be realigned towards the unforeseen expenses.

All of the above is only possible if you have proper up-to-date bookkeeping. Well, you don't want to make any business decisions without looking at the financial data. Do you?

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Thank you and Have a great week.