Everyone has heard the expression “save for a rainy day” until the verge of cliché. For a small business owner, creating an emergency fund may not only be practical, but critical. A “rainy day” fund is the best insurance one’s small business has for continuing operations in the face of unexpected financial issues or helping one recover from an unplanned, costly event.
In the small business world, every penny counts are stretched like one of those machines does at the big box stores. One will need to save more, spend less, or both. One way to ensure that a business owner will be in a position to control their circumstances is to shift their mindset to include savings as part of their annual business budget.
Here are some ideas to help one start building their emergency rainy day fund now and continue accumulating funds over a long-term period of time.
One of the most obvious strategies for starting an emergency fund is to reduce expenses and stash the savings. This can be easier said than done and don’t expect to be perfect overnight. To accomplish this, one will need to take stock of their business expenses on a regular basis to pinpoint unnecessary expenditures and know where one can cut costs. Invite one’s financial team to make growing the emergency fund a top priority. This may inspire them to find creative ways to be more economical, knowing that every dollar saved is going towards helping secure the company’s future.
No Needless Spending
Whether it is a hot deal on a load of stationary or a gadget that is advertised to fix all one’s day to day office problems, it is not worth investing money into. However, as a small business owner, controlling expenses is critical to the company’s survival. Investing in the future of the business means budgeting wisely and avoiding spending money needlessly. Seemingly small expenditures add up over time, so focus on sticking to the monthly business budget (one should always configure this on a monthly basis) and using any extra income to build a cushion for when unexpected expenses arise.
Tax Refunds: Make Good Use
Is one’s business seasonal? While one should strive to put money aside all year long, seize the opportunity to stash additional cash in the rainy day fund during the months when the business generates higher profits. This will make up for periods when revenue is on the lean side. Tax refund time is a good time to add to the rainy day fund and build up the businesses nest egg.
Separate emergency funds from other business bank accounts. This will allow one to keep tabs on exactly how much one has got saved and resist the urge to spend the money elsewhere. It is an out of sight, out of mind tactic.
Don’t be tempted to tap into the emergency fund to cover expenses that, quite simply, are not emergencies. One way to avoid this is to define situations that the business owner and their team consider to be critical business emergencies. Commit to using the fund only when these circumstances arise.
The best trait one can have as a business owner is discipline. Don’t be afraid to implement self-discipline to ensure the longevity of the rainy day fund.Share