Expecting the unexpected: hidden business costs

Starting a business is a step into the unknown. Even with a well-thought-out business plan, there are often a lot of overlooked costs that can quickly eat into your cash reserves. It’s not something you can afford to ignore with your initial profit margin being so small. As experienced accountants to contractors, here is our list of some of the most common hidden costs that can catch startups off-guard.

Inventory Shrinkage

Shrinkage is something commonly associated with companies that sell physical products and is often caused by shoplifting, employee theft, paperwork errors and vendor fraud. The issue is that it can be hard to identify which of these causes is at work, meaning it is relatively difficult to address the problem. While it is possible to mitigate it to an extent, there will always be a degree of shrinkage in any business, as no system is perfect. Planning around it is the key. Leave yourself some margins that account for inventory shrinkage, and then calculate it into your costs to ensure it doesn’t throw off your spending. You can contact us for help with identifying potential causes of shrinkage.

Administrative costs

Administrative costs can easily add up in modern offices where technology is prevalent. For example, companies across the UK spend a significant amount of money on software upgrades to protect against viruses and spyware. One way to reduce administrative cost is to standardise equipment like computers to make it easier to upgrade and manage, or similarly to standardise software such as antivirus programs. This way it is much easier and cheaper to upgrade and maintain everything, saving you money down the line.

Shipping and delivery costs

While national delivery is not as expensive as it used to be, thanks to the onset of online marketplaces like Amazon, shipping remains very expensive without a contract. Even with a business rate, you’ll need to take into account increases in price for moving large amounts of some products. Dealing with delicate products can also drive up the shipping price. Don’t be afraid to negotiate for a good deal as the continued business is valuable.


The cost of business insurance is tough to predict, as it depends on the nature of your work, the type of insurance you need, and how risky your venture is perceived to be. However, it can be worth researching which type of insurance you really need and which are cost-effective. Not all are suitable for your business, and renewing unnecessary insurance is an easy way to lower your profits.


Do not assume that employee costs will remain the same. Your business’ income may be consistent, but employee salary increases yearly. It’s also likely that employees will ask for higher wages, bonuses, and fringe benefits among other things. Ensure that your employment budget covers rising employee salaries and benefits so that your business can retain its workforce. It’s more cost-efficient to retain current employees than to find new ones.


You know that you need a license to start a business, but often several other licenses are required depending on what your business does. Make sure you research exactly which licenses you need beforehand, as obtaining and renewing them can sometimes be quite expensive, especially if there are multiple ones that you have overlooked. The government’s license finder tool can help you identify which ones you need.

Legal fees

Legal fees are the ultimate unexpected cost, and potentially the highest. Legal fees can reach tens of thousands of pounds and come seemingly out of nowhere. Prevention is better than cure, so if your customer service and business partner relationships are good, your chances of going to court are much lower. However, ensuring that you have a significant amount of liquid capital can soften the blow if it does come.

We know what it takes

At Berley, we understand what a business needs to get going. We’ve been over the process, understood the costs and lived through the mistakes, all so you don’t have to.

To find out how we can help, give us a call on 020 7788 8261 or fill out our Online Form.

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