Expense time today is defined in monetary terms as the time a company or an individual spends on activities for which payment is not due until the period of time for which the activity was conducted has expired. Most companies define expense time in fiscal terms by considering the end date for recognition – i.e., the end of the period of operation. Others prefer to use a different accounting method that involves looking back over the entire period of operations. This difference in accounting practices produces results that can vary significantly from company to company.
Accounting practices used to track fixed expenses like equipment and materials purchases are easy to understand and track. Reoccurring expenses like payroll, rent and utilities can be harder to track and are thus not included in the traditional fixed expense accounts such as plant maintenance and depreciation. Fixed expenses like sales are easy to track since they can be easily accessed via expense orders. On the other hand, recurring expenses like accounts payable are more complex and must be computed based upon future information.
What about surprises like natural disasters, strikes, outbreaks, explosions, fires, floods, storms, emergencies, and illnesses? Are they really unexpected? What if one of your employees has an illness that is diagnosed right away but comes back several months later after having the treatment? If the illness lasts a long time, then are you really surprised when the diagnosis is announced a year or two after the fact? These situations are called uncertainties, and they affect how the company reports its income and finances.
Uncertainty can creep up in just about any area of your business. A natural disaster, or an unexpected expense, can quickly deplete your emergency fund. This leaves you with very little to pay the bills and meet your obligations. How do you address this issue? By simply deciding on a set aside for unexpected expenses, which are known as a reserve fund.
You might wonder how you go about doing this. Most insurance policies have built in provisions for disasters, home repairs, and illness. Usually the costs of these unexpected expenses are taken out of your regular (normal) income before it is applied to your emergency fund. However, there are a few ways to deal with this expense once it becomes a permanent expense.
First of all, you should consider not going over your normal monthly limit for medical payments. In some cases, you can exceed your normal monthly limit on a monthly basis for medical emergencies only, but in most cases, you cannot exceed your normal monthly limit on a year-round basis for medical payments. Once your expenses exceed your normal monthly limit for a year, you will have to take out another policy. If you are one month behind on your bills, you may need to get a supplemental policy.
Another way to deal with this expense is by keeping track of all of your bills, including those you receive for medical services and any other type of additional expenses. In fact, it is recommended that you keep track of all of your bills when they first occur, as well as your adjustments to your normal monthly budget for each month. One good way to do this is by using a prepaid insurance policy. A prepaid insurance policy gives you the flexibility to pay for your emergency expenses in the event that your primary insurance policy is insufficient to cover the expense.
Adjusting your budget for emergencies is often a difficult task. However, it is necessary in order to maintain your budget on a year-round basis. Your family’s financial future depends on making sure that all of your needs and expenses are covered. Therefore, budget carefully to avoid accumulating fixed expenses, and adjust your expenses according to your needs.