You’ll often hear that it’s best practice to keep an emergency fund for your business. Emergency funds are great to help weather your business through so unexpected losses like clients leaving or, I don’t know, a worldwide pandemic perhaps?
Sounds great right? But how do you get one?
When you’re running your business, it’s hard to think about anything other than increasing your income. But there are some simpler and easy ways you can save up for your emergency fund:
1. Set A Number
It helps to have a goal in mind, and then work back from there. Calculate how much income you need to keep your business afloat for six months and that will be your number. Once you have your goal figure, you can begin to work out how much you can comfortably save each month and how long it will take you to reach your goal.
2. Add To Your Fund First
The easiest way to avoid any temptation to not spend all your income is to take a percentage of your income out straight away and put it into savings. And if you find yourself itching to take the money straight back out again, then there are a lot of savings accounts that won’t allow you to take the money out for 30 days or more.
3. Track Outgoings
You need to know where the money in your business is going. Make a list of all your expenses and how much you spend on each of them every month. Have a cold, hard look at them and ask yourself, are there any areas you could cut down or any ways you could save money on by switching providers? The more you can cut down on outgoings, the more money you have to put towards your emergency fund.
4. Create A Budget
Once you know where all your money in your business is going you can create a budget for each of these expenses. This will help you stick to a limit and give you the freedom to spend any excess by putting it into savings.
5. Automate Your Savings
Automating some of your processes will take all the hassle out of saving. And who doesn’t love saving money without thinking about it? You can automate a few ways like scheduling money to come out of your account straight into your savings on one day a month with standing orders. And some bank providers allow you to round up to a pound every time you use your card. All the pennies will then transfer automatically into your savings account.
To automate your accounts further, rope in an accountant who can help you build your emergency fund and reach all your financial goals. They can help you take advantage of all the new tax regulations, helping you save even more. For all help with your accounting, get in touch with Kara.