6 Secrets to Saving for Your Small Business’s Emergency Fund
Having an emergency fund for your business is just as important as having one for yourself. It provides peace of mind if your business experiences a crisis or an unusual event. Just make sure you can quickly access the money if something happens, so don’t worry about putting the funds in something that will gain a lot of interest. Ideally, you should have enough in your savings to cover between three months and one year of operating expenses. Not sure how to save that much? Try out these six tips to start building your emergency fund today.
1. Cut back on business trips
If you’re going on business trips, think about if those trips are necessary. You might be able to conduct some of those meetings by phone or through a video conference to save some money. Once you’ve figured out how to cut back on business trips, take the money you’re saving and put it in your emergency fund.
Read also: 6 Tips for Deducting Travel Expenses
2. Save during the good times
If your business is seasonal, don’t worry about saving much during the slower seasons. Instead, put aside as much as possible during the seasons when you’re making more money.
Read also: 6 Ways to Save Money in Your Small Business
3. Keep it separate
Set up a distinct savings account for your emergency fund. If you keep your savings in your regular business account, it will be too tempting to spend it. When you keep it separate, you’ll be less tempted to spend it, and you’ll always know exactly how much you’ve saved.
4. Set realistic goals
Setting savings targets will give you something to work toward, but make sure you choose reasonable amounts, so you don’t become discouraged. Setting goals that are too high when you’re first starting your business could put an unnecessary financial strain on your company. Start with something small and increase your contributions as your business grows.
5. Treat it like an expense
Pretend that putting money in your emergency fund is a necessary business expense. You’ll take it more seriously and will always pay into it.
Read also: How to Set a Budget for Your Business
6. Cut out impulse buys
Impulse buys could be eating into your potential savings. Every time you ignore the impulse to buy something, move the amount you would have spent into your emergency fund.
By setting aside money for an emergency in your small business, you’ll be ready if there’s a crisis. Learn more about how to create a disaster preparedness plan for your small business.