The amount of unforeseen expenses in construction. See what “unforeseen expenses” are in other dictionaries

Unexpected expenses - these are expenses of the enterprise, the size of which cannot be calculated when drawing up a financial plan. These include:

• fines, penalties and penalties for violations of transportation conditions for all types of transport,
• failure to fulfill delivery obligations (production and delivery of low-quality products, late payment), etc.

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Before approving the budget, it is necessary to include in it additional costs that may arise due to any Unforeseen expenses represent additional funds, providing the ability to perform various tasks, which may cost more than planned or even be unplanned. For example, unexpected costs will arise if costs have been estimated too low, if supply costs are higher than expected, or if a task takes longer to complete.

Also, unforeseen expenses mean costs that are not directly related to production and include, among other things, penalties, fines, penalties for violation of transportation rules, failure to fulfill delivery obligations, manufacturing low quality goods, compensation for losses incurred by consumers of low-quality products, late payment for supplies, and so on.

Methods for calculating unexpected costs

Creating a reserve financial resources to cover unforeseen costs is a way of dealing with risks, involving an assessment of the relationship between the potential risk affecting final cost project, and the amount of expenses that are necessary to overcome possible failures in the implementation of the project. The main problem in the process of creating a reserve is the correct assessment of the potential consequences of risks.

Contingency costs can be calculated in several ways. For example, one method is to assume that the costs that were included in the enterprise's budget are the most probable. Then used mechanical method calculating contingency costs for each task. For this purpose it is used simple formula: 1 - (optimal x optimal costs. The adjusted contingency value is obtained taking into account the estimated costs and the most probable costs. This value is equal to the difference between the optimal costs and the maximum costs in the worst case scenario.

A large difference between the optimal cost and the maximum cost in the worst-case scenario entails the largest unexpected costs. On the contrary, if the difference between these values ​​is insignificant, then the unexpected costs will be less.

The main problem with using this calculation method is that it depends on the use of an optimal cost estimate. In reality, the use of this estimate is only appropriate when it was based on the most probable, near optimal, or optimal option.

Often, project managers use worst-case metrics when they believe that the assigned tasks are associated with high risks. Then contingencies should be calculated using other methods.

Alternative method calculations by which it is possible to estimate other costs, including unforeseen ones, is to add a reserve 10 percent above the budget amount required for the implementation of the project.

After which the reserve has been allocated, you can compare the actual and planned distribution of expenses. Based on the data obtained, you can identify trends in the use of the allocated amount. Unused part can be returned to reserve for another project. It is important to note that all sections of the use of the reserve must be recorded, and reports and reports must be prepared periodically about them, along with other information about the cost of the project.

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Unforeseen expenses can be material or financial.  

Unforeseen expenses are ultimately expressed in a decrease in sales volume due to the emergence of a negative reaction of buyers to the company's products. The most common reason for this phenomenon may be the high costs of consumers for Maintenance, as well as frequent product failures. Firms also win in the case when the buyer’s lawsuit regarding poor quality of the product is decided in favor of the manufacturer. Losing customer trust is tantamount to unexpected quality costs.  

Unforeseen expenses for the repair of fixed assets can also be written off to account 31 Deferred expenses with subsequent assignment to the appropriate cost accounts.  

Unforeseen expenses are accepted in the amount of up to 2% of the amount of current costs.  

Unforeseen expenses are expressed in a decrease in sales volume due to a negative reaction of buyers to the company's products.  

Assessing contingencies helps minimize cost overruns.  

The reserve for unforeseen expenses and expenses is accrued on the total of volumetric and limited costs according to the estimate. Refundable amounts are determined in the same manner as in industrial construction.  

The contingency reserve is determined only for those types of costs that were included in the original estimate. The reserve should not be used to offset costs incurred due to unsatisfactory performance.  

The contingency reserve is determined only for those costs included in the original estimate and should not be used to compensate for costs resulting from unsatisfactory performance.  

Losses due to unforeseen expenses can be expressed in the form of payment of a fine for the supply of products poor quality. Such losses often occur with cooperative deliveries. The main supplier pays a fine to the buyer, although the product failed due to the fault of a related company that supplied substandard components. The fine, calculated on the cost of the main product (and not the component parts), amounts to losses of the main supplier, which it can then recover through a claim procedure from the subcontractor.  

To cover unforeseen expenses and costs incurred in accordance with constituent documents reserve capital can be created by other organizations at their discretion. To account for reserve capital, account 82 Reserve capital, passive, balance sheet account is used. The procedure for the formation and use of reserve capital is determined by current legislation or the charter of the enterprise. The amount of contributions to the reserve fund (capital) is regulated by current legislation and constituent documents.