123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Business >> View Article

Is Walking Away From Sunk Costs The Best Option?

Profile Picture
By Author: Leon A. Elwell
Total Articles: 73
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

Emotions make us human. They can also cause us to make rash decisions. Business owners and managers often let emotions dominate the decision-making process. This is especially true when choices are based on “sunk costs.”

Why sunk costs can lead to trouble

Broadly defined, sunk costs are past expenses that are irrelevant to current decisions. For example, many firms hire consultants who sell and install software. In some cases, a company is left waiting for years for a functional and error-free system.
Meanwhile, costs continue to escalate. But are those costs relevant?

Managers, especially those who initially procured the software and contractor, may reason that pulling the plug on a failed contract would be wasting all the money spent. Not true. That money is “sunk.”

Other examples of sunk costs may be found in the areas of product research, advertising, inventory, equipment, investments and other types of business expenses. In each of these areas, companies spend money that can’t be recovered — dollars that become irrelevant for current decision-making.

Sunk costs are a waste of time — move on

Truth be told, the only relevant costs are those that influence the company’s current and future operations. Throwing good money after bad won’t salvage a poor business investment — or a poor business decision.

Deciding to continue with a non-performing contract or a money-losing idea instead of staunching the flow of cash and changing course is irrational. It may be difficult to admit that a mistake was made. It may bruise the ego of the decision maker. But abandoning the sunk costs is often the wisest decision.

Looking for a solution that streamlines your accounting? BAS has been doing it since 1971 and is here to help you! Give us a call today.

More About the Author

Business Accounting Systems, P.C., is a South Jersey Public Accounting Firm located in West Deptford, New Jersey that has been providing excellence in servicing the accounting, payroll, and tax needs of independently owned small businesses throughout the Tri-State area. For More Info : Visit Here : https://www.bas-pc.com/

Total Views: 139Word Count: 285See All articles From Author

Add Comment

Business Articles

1. Threat Protection: Benefit Your Company’s Safety With Cyber Security- Mannai Networking & Elv
Author: Mannai

2. Custom Hotdog Boxes - Top 3 Advantages
Author: Andy Young

3. Fire Resistant Paint For Industrial & Commercial Building Materials
Author: Protexion

4. Control Technician Jobs Availability In Ontario, Canada.
Author: purestaffing

5. Why Is There A Need For Hiring Security Guards?
Author: Logan Hartley

6. Why China Is Considered As Best Tourism Place?
Author: anu walia

7. Tips To Make The Most Out Of Courier Service In Darwin
Author: Gabriel Gould

8. The Benefits Of Hiring A Third Party Seo Agency Today
Author: Tonchidot

9. Benefits Of Hiring A Third Party As An Seo Agent For The Company
Author: Tonchidot

10. China Business Seminar In London: Why Baidu Advertising Is Becoming More Popular
Author: Barry Alison

11. Need A Star Bm Magazine? Check Sarco Inc. First!
Author: Ruben Carrion

12. Amines Market Size, Share, Growth & Trend Analysis Report
Author: roselyn henson

13. Fruits And Vegetables Ingredients Industry 2023 With Market Top Manufacturers, Region And Demand
Author: Sidhant

14. Air Fryer Market Size, Share, Growth & Trend Analysis Report
Author: roselyn henson

15. Send Flowers To The Uae Through A Trusted Flower Delivery Network
Author: Arabian Florist

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: