Having a cash safety net for your business is important. But, it can be tough to put money aside when your resources are being stretched by things like unexpected business emergencies, taxes, and payroll. So, how do you build reserves when things are tight? Here are three quick tips to help you build a “rainy day” fund for your business.
#1 Examine Your Current Cash Flow Plan and Cut Unnecessary Expenses
As John Wooden says, “It’s the little details that are vital. Little things make big things happen.” It is amazing how little, unnecessary expenses can cannibalize your cash flow and hinder your ability to save. Take an afternoon to ruthlessly examine activities that are consuming your working capital. Do you have recurring software subscriptions that you no longer use? Are you paying for a service that isn’t netting positive return on investment (ROI) for your business? Cut the waste ASAP. Then, direct the extra cash flow that you have freed up to reserves.
#2 Shift Your Focus from Saving to Sales
Sales solves problems. Shift your focus to driving profitable sales, without increasing costs. This may mean deploying tactics like: launching a referral program, incentivizing upselling, reaching out to former customers, and/or re-engaging prospects who have abandoned before converting. Once you have the cash flow from new sales, you can shift your budget and allocate additional capital to build your “war chest.”
#3 Find Alternative Sources of Working Capital
Sometimes, you just need a quick infusion of working capital to smooth your cash flow and create your peace of mind fund. In this scenario, a small business loan may be your best option. Find a loan that includes business-friendly benefits like early repayment discounts, low rates, and flexible payment options. Once you secure funding, put a percentage of that capital into your reserve fund right away.
But, the most important tip of all is to set aside something consistently – even if it is the smallest amount. Small amounts can eventually snowball into a large cash cushion that can provide peace of mind during a business emergency.