Industry sector:

Electrician: Capital expenditure

Once you have given further thought to exactly how your electrical contracting business will operate, you might like to refine your estimates of capital costs to make sure that you have identified all of the items you will need and any other capital costs you will incur.

When estimating the cost of tools and equipment, bear in mind that professional quality tools are considerably more expensive than DIY ones. Although the two often look similar, you can expect a professional quality tool to outlast a DIY 'equivalent' many times over. It will probably also perform better. It is this superior build quality that you are paying for - the tool will be designed to be used hard every day, rather than just once in a while. Of course, you could decide to buy cheap and replace frequently, but remember that it is your valuable time that will be wasted when a crucial tool packs up on a job.

You won't want to replace your tools and equipment more often than you need to, so do be aware that they're often very attractive to thieves. As well as opportunists who break into traders' vans in the hope of finding valuable items, be aware that it's not uncommon for contractors to have their tools stolen by other workers on busy construction sites.

Don't forget to include any expenditure such as having your logo and livery put on any vehicles. Make sure you have thought about the security measures you will put in place - for example, a burglar alarm for protecting tools and materials in storage.

If you are paying cash for all the items you are buying for your business, enter the amounts - including VAT - in the months when you expect to pay for them.

If you decide to buy some items on hire purchase, or with a loan, enter the deposit and the monthly payments in the months in which you will pay them. These payments will be made up of both capital and interest. Enter the capital here and the interest under 'Bank/finance charges and interest' in your cash flow. The agreement will identify the amount of interest payable annually - if you deduct this from the total amount you have to pay each year the balance is the capital.