August 14, 2025

Is Your Business Prepared for Unexpected Costs?

Written by McCay Duff LLP
An image of a small business owner in Ottawa speaking with their local CPA firm to discuss some unexpected cost in their small business.

Running a business is fundamentally different from holding a job. As a business owner, you not only have the potential to reap greater rewards, but you also shoulder the full weight of the risks involved. No matter how meticulously you plan, there will always be elements of uncertainty.

Opportunities often arise unexpectedly, and the ability to capitalize on them depends on how well-prepared your business is to respond. A prime example is the surge in remote work during the pandemic, which created a significant opportunity for e-commerce companies. Those that were agile enough to scale operations—sometimes by hiring contract workers at premium rates—were able to meet the sudden spike in demand and realize substantial gains.

Understanding Unexpected Costs in Business

Running a business involves navigating both opportunities and challenges. While unexpected opportunities can accelerate growth, unforeseen costs can disrupt operations, delay expansion plans, and strain financial resources.

Unexpected costs arise from events that are difficult to predict—such as equipment failure, cyber incidents, or regulatory changes. For example, an equipment breakdown or emergency maintenance can halt operations for days, increasing fixed costs and deferring revenue. Similarly, a cyberattack or an accident near your premises can cause operational delays, leaving employees idle and deliveries disrupted.

A successful business is not only agile enough to seize unexpected opportunities but also resilient enough to manage contingencies effectively.

How to Prepare Your Business for the Unexpected

You know your business best. Start by brainstorming potential scenarios and exploring how you would respond. Reading case studies, industry news, and creative problem-solving examples can help you think strategically and develop contingency plans (Plan B and Plan C).

One of the most effective tools in managing uncertainty is liquidity. Having access to funds, whether to scale quickly, cover fixed costs during downtime, or rebuild after a setback—can make a significant difference. While some challenges require better planning, others demand financial readiness.

Common Unexpected Costs and How to Prepare

1. Equipment Failure and Repairs

  • Impact: Downtime, lost revenue, and customer dissatisfaction.
  • Preparation:
    • Schedule regular maintenance.
    • Upgrade outdated equipment to reduce total cost of ownership.
    • Invest in extended warranties for critical machinery.
    • Strengthen cybersecurity to prevent digital disruptions.

2. Supply Shortages and Price Volatility

  • Impact: Increased procurement costs, delayed production, and lost sales.
  • Preparation:
    • Diversify suppliers to reduce dependency.
    • Monitor market trends and stock up in anticipation of shortages or price hikes.
    • Secure long-term contracts or subscriptions to lock in prices.

3. Seasonal or Cyclical Slowdowns

  • Impact: Revenue fluctuations and underutilized resources.
  • Preparation:
    • Diversify revenue streams (e.g., a farmer offering landscaping services).
    • Offer off-season promotions or services to maintain cash flow.

4. Major Contingencies

  • Impact: Financial strain from disasters, accidents, or leadership loss.
  • Preparation:
    • Maintain comprehensive insurance coverage (property, liability, life, etc.).
    • Regularly review and adjust coverage as the business grows.
    • Establish succession plans and key-person insurance.

5. Legal and Compliance Costs

  • Impact: Fines, lawsuits, and reputational damage.
  • Preparation:
    • Stay updated on regulatory changes.
    • Implement strong compliance and documentation practices.
    • Set aside reserves for potential legal expenses.

Financial Strategies for Resilience

  • Manage Cash Flow: Monitor receivables and make provisions for bad debts. Deduct irrecoverable debts from taxable income where applicable.
  • Maintain Liquidity: Avoid depleting cash reserves to repay long-term debt prematurely.
  • Build an Emergency Fund: Set aside a portion of profits annually. The ideal amount depends on your business size and risk exposure.
  • Secure Backup Financing:
    • Open a secondary credit card for emergencies (use responsibly).
    • Apply for a business line of credit—interest is only charged when funds are drawn, making it ideal for short-term needs.

Final Thought

Preparedness is a competitive advantage. By anticipating risks and building financial and operational buffers, your business can not only survive the unexpected—but thrive in it.

Contact McCay Duff LLP in Ottawa to Help You with Your Business Finances

Being prepared for unexpected events is a matter of skill. It needs expertise in every aspect of business, from loans to investments, cash flows, finances, and business acumen. That is what a chief financial officer brings to the table. To learn more about how the team at McCay Duff LLP can provide you with the best CFO expertise, contact us online or by telephone at 613-236-2367 or toll-free at 1-800-267-6551.