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How to calculate the cost of downtime


One overlooked truth is that downtime costs accelerate in a non-linear fashion every hour. If a system fails for five minutes, the costs are fairly low because manual methods (paper and pencil) of making records or communicating by telephone instead of e-mails can suffice to conduct business. Over an extended period, however, the volume of work overwhelms the manual processes. Yet some businesses -  such as Amazon or e-Bay - cannot run at all on manual processes. Business and financial operations increasingly deteriorate, and the rate of dollar losses grows - sometimes to the point of fatally damaging the business.   In addition, when assessing the financial impact of downtime, you need to consider factors such as potential lost revenue, reductions in worker productivity, and damaged market reputation. In some cases, downtime can even reduce shareholder confidence, which can create unnecessary and unplanned costs. Financial analysts and accountants at your company can help you come up with the factors at your company that are affected by downtime and contribute to its costs.

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