Businesses pre-pay expenses for practical and, depending on the type of expense, necessary reasons. The value of a prepaid expense is an asset that reflects some future benefit, and the value of this asset becomes an expense as benefits are exhausted. There are necessary capital and operating expenses that most businesses opt to or are required to prepay, "common prepayments include insurance, supplies, advertising and rent.. 

Insurance payments are always prepaid since the insurance business is modeled on paying premiums for potential benefits in advance of need, rather than modeled on paying for those benefits when or after they are needed. Companies can also take advantage of discounts or reduced fees, by prepaying extended periods of insurance coverage. There is an obvious incentive to prepay.  Rent or leases for facilities or equipment are also commonly prepaid for an extended period of time, as are recurring subscription services that may be required. 

Besides discounts or price advantages, practical reasons to prepay expenses include reducing time, effort, and errors in order, billing, and payment cycles, barring any time, effort, and errors to effect entries and adjustments in financial reporting. For instance, buying supplies in bulk to cover extended periods of operating needs can lessen the frequency of ordering refills, and the resulting process.