How to build an emergency fund for your business
When you run a small business, then you will start to realise that every penny that you make is important. Particularly if you are also trying to look after your family too. Even with the best planning and plenty of effort, sometimes running your own business can be hard. There is always a chance that something could happen to really put a strain on your finances, and this could have a knock-on effect with your family life.
One way that you can try to minimise the risk of this is to have an emergency fund for your business. This “rainy day” fund will top up your cash supplies and ensure that when times are hard, you can still keep your business afloat.
But, when you are counting the pennies, it can seem hard to put money aside. So, how can you build an emergency fund for your business?
Lower what you spend out
Sounds like a simple way to save money, but you can be surprised by just how much you can spend out as a business. It is a good idea to try and negotiate with your suppliers, securing yourself a reduced rate and you can also try and see if you have any tax deductions that might be owing to you. Another thing that you can look at is the advertising and marketing costs that you are spending, is there a way to lower these?
Try to save when the profit is coming in
If you find that your profit can vary, particularly during different times of the year, then it is a great idea to make sure that you put more profit away at the times when you are making more. It might seem a shame not to enjoy such a high-profit month, but if you find that those profits dry up then you will be grateful that you made the effort to put the money away.
Save your money in the right way
Some people like to display their rainy day fund in cash, others like to squirrel it away in their savings account. As a business, you should definitely see your rainy day fund as an investment. It is a good idea to put it into a low risk and short term form of saving, such as an instant access account. Whilst this may not give you the best rate on interest, it will make sure that you can get to your money when you need it most.
Even the most successful businesses can have times when disaster strikes. If you are concerned that this could happen to you, then it makes sense to try and have an emergency fund. It might be a few thousand, it might be a few hundred. Just make sure that it is enough to keep you, your business and your family ticking over.