Avoiding The Hidden Costs of Business Premises
Regardless of whether you are buying your premises or simply leasing or renting then the cash flow of your business will change.
Many businesses will look at the cost of taking on property by assessing how much the rent cost is. The cost of occupying the property, let alone owning it, comes with a number of other outgoings also. It is often that these additional costs are the ones which take the small business by surprise.
Any surprise cost to any business is always unwelcome.
When taking on a lease for a commercial property your solicitor will always advise on your commitments and any own risk clauses that exist within the agreement. What doesn’t happen is that you are given any preparation to plan your cash flow to allow for these additional costs.
Let me explain further.
The Forgotten Premises Costs
Almost every commercial lease is a full ‘insuring and repairing’ lease. This means that you are liable for any repairs or renewals which occur during the period of your tenure. Lease will also have a rent renewal clause which is always the period time when you and your landlord will have a different opinion!
These events have an impact on your cash flow and is well worth planning when these will occur as it may be prudent to bring forward some of these events to a time when cash surpluses are more positive. The law of sod of why states that unexpected costs always occur at the worst possible time.
Cost Planning Template
Below is a basic cash flow spreadsheet which you can download and use. This covers the basic costs of taking on a commercial property and I would encourage you to complete this before acquiring new premises, then use the spreadsheet with your accountant when you next draw up your 12-month forecast.
Please use the spreadsheet as you wish, you may need adding additional columns or remove items are not applicable to you however anything that can help avoid unexpected costs has to help.
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By Dave Farmer