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In many cases, the best way to estimate miscellaneous expenses is to combine known financial history with anticipated needs. The miscellaneous expenses category is meant to be small, but at the same time, it is better to slightly overestimate anticipated expenses rather than fall short. Depending on the business or venture, leaving an overage of up to 20 percent can be reasonable. While it is particularly difficult to be precise when estimating these kinds of expenses, with experience, the process will usually become progressively easier.
Previous expenditures in this category are the first thing to consider with estimating miscellaneous expenses. Some of the things to determine include which past expenses seem to be paid one time or rarely and whether miscellaneous expenses were higher or lower in a particular year because of an unusual event. By researching these elements, it is possible to determine truly ongoing miscellaneous expenses. This figure can serve as the base for the estimate.
The next step in estimating miscellaneous expenses is to analyze unusual or unexpected costs in past years. If this expenditure tends to be approximately the same amount each year, then it is likely that it will be an acceptable estimate for the next year. When there is a wide variance among these expenditures, then a more complex analysis will be necessary in order to determine a practical estimate. By analyzing the events of past years and anticipating those of the year to come, it can be possible to anticipate what kinds of needs might arise.
When estimating miscellaneous expenses, it can also be useful to determine where past estimates have been wrong. Estimates that have fallen short of needs tend to be more problematic and usually provide more insight as to how the category can be properly budgeted. When studying this area, it can be useful to learn why expenses in this category went over — whether it is a single event that is not likely to happen again or an unexpected expenditure that could arise in the future due to factors such as the nature of the business or the economic climate.
Another factor to consider when estimating miscellaneous expenses is whether there is a need for a new category to accommodate a recurring expenditure in that category. If it is determined that this expense will be ongoing, then allowance for the miscellaneous category will usually need to be reduced. How much to cut back depends upon the average amount spent on the expense that is now in its own category.
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