Why Are Compliance Overheads Important In Business?


Making money from a business can be hard. With so many start-up costs, loans, debts and other financial difficulties hanging overhead, it might seem near impossible to get ahead.

However, other costs can impact a business’s ability to accumulate profits.

Compliance costs refer to all the company’s expenses while ensuring they adhere to industry regulations and standards (such as licensing, OH&S requirements, etc.). These costs can increase as an industry’s regulation standards increase and a company expands globally. These costs are sometimes referred to as a ‘compliance overhead’.

Some businesses can spend up to 10% of their revenue on compliance costs. However, it costs to be non-compliant, with fines often costing several times more than what they otherwise would have to cover compliance costs. It can also lead to reputation problems within their industry for the failure to pay.

Small businesses may often feel the impact of compliance costs more as it eats into their profits and reduces their revenue streams. With some having smaller profit margins than many others, this can be very daunting.

Compliance costs are necessary, though – the expense allows businesses to ensure that their workers are safe and working in standardised, regulated conditions that the industry approves of.

Failing to ensure that your business is compliant could lead to significant penalties. It is best to make the expenditure rather than risk being caught.


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