As a business owner, you know how important it is to maintain your budget and keep expenses under control. Despite your best efforts, though, there are some expenses that can seemingly come out of nowhere and do serious damage to your business’s bottom line. When this happens, it can be catastrophic for your business’s finances and overall stability. Luckily, though, you can prevent this by anticipating the following four most common unexpected expenses.
1. Workers’ Compensation Claims
Unfortunately, workers’ compensation claims happen every day and have a serious impact on businesses. According to statistics, the average cost for such a claim is more than $41,000, which is a hefty sum even for large and enterprise-sized businesses. In fact, these companies may be even more vulnerable to the impact of a workers’ comp claim because injured employees may seek a bigger payout. Businesses must also juggle the many administrative tasks and expenses that arise in the wake of a claim.
In addition to investing in a robust workers’ compensation insurance policy, your business can minimize this cost by outsourcing the pharmacy benefit management component of workers’ compensation claims. Pharmacy benefit management is often both a time-consuming and prohibitively costly part of the workers’ compensation process, but outsourcing it to the best PBM company can minimize the burden that companies face. This can also minimize the liabilities associated with pharmacy benefits management.
2. Employment Practices Liability
Pharmacy benefits management isn’t the only liability that your company may face. Many businesses do not realize that they also face a heightened risk of employment practices liability, too. This liability can stem from any potential allegation of discrimination, harassment, wrongful termination, or breach of contract. If your company faces charges such as these, you may be hit with litigation and a claim for damages.
If the claim is successful, it could force your business to furnish a payout that’s thousands of dollars — or even more. Companies must combat this risk by vigilantly mitigating any potential liabilities throughout the employment process and securing insurance to protect against the risk. Employment practices liability insurance can cover the expenses of litigation or settlements that result from an accusation of wrongdoing.
3. Monthly Insurance Premiums
Although insurance is a great way to protect your company from risk — and all of the associated costs — it can be a costly expenditure in and of itself if you do not budget the expenses carefully. There are certain factors that can greatly increase the cost of insurance premiums, including an excess of claims, known liabilities, and other factors that impact your company’s risk. In some cases, if your company faces litigation, this could also cause your business insurance premiums to increase.
Your business can get these costs under control by minimizing your costliest risks. You don’t want to face a notice that your premium is increasing and realize that the new insurance rates won’t fit in your business’s budget. Businesses can work directly with insurers to minimize premiums by bundling coverage, adjusting the policy’s deductible, and eliminating any coverage that might not be necessary.
4. Increased Cost of Supplies
It’s unfortunately true that some expenses are out of your control. The economy fluctuates, and business expenses can change, too. When this happens, the cost of supplies can increase dramatically and unexpectedly. This is a major problem for any business that relies on material supplies to maintain daily operations, and it can pose a serious threat to your profit margin if you don’t find a solution.
There are many ways that businesses can combat the increasing cost of supplies, though. You can start by buying supplies in bulk at a moment when they are priced affordably, for example. You can also negotiate directly with vendors to lock in guaranteed rates in the event that prices fluctuate again in the future. Conversely, you can find ways to cut back on your business’s reliance on these supplies.
How To Combat Unexpected Expenses
There are a myriad of unexpected expenses that business owners must anticipate and mitigate in order to protect a company’s bottom line. In addition to workers’ comp claims and employment practices liability, you must account for the cost of insurance premiums and essential supplies. Larger businesses may have the resources to withstand these unexpected expenses, but they can still add up quickly. Develop a plan to fight back against this risk by investing in insurance or outsourcing certain tasks in order to save money. These strategies can help businesses of all sizes retain profitability and minimize the expenses that often come from liabilities.