This is a sponsored post. McAuley Freelance Writing, LLC dba Blogging Badass was paid to publish this post, Increase Your Chances of Survival: Importance of Building an Emergency Fund for your Business.
The emergency fund is a common concept in personal finances. Having a savings account with a bit of money to cover any unexpected expenses can get you out of a bind and help you to avoid borrowing. This concept works exactly the same in business and all businesses should have an emergency fund to fall back on. If you hit a slow period and you are struggling to cover your overhead, building an emergency fund for your business may save the business. If your business doesn’t already have an emergency fund, here’s how you can build one.
Building an Emergency Fund begins with tracking finances.
The first step towards saving an emergency fund is understanding exactly how much available cash you have. It’s important that you track your finances closely so you know what you can afford to put aside into your emergency fund. If you make the mistake of putting too much into your emergency fund, you will struggle to cover your overheads and you may run into cash flow issues. On the other hand, if you don’t put enough in, your emergency fund won’t help you when things get tough.
Learn To Invest
Once you start building an emergency fund, it makes sense to invest a portion of it so you can watch it grow. Don’t put the whole thing into investments because there is always a chance that you could lose it, but investing a small chunk will help you out a lot in the future. You need a flexible option, so you should trade Forex because you can take your money out whenever you like. This is important because, if you do find yourself in a bind and you need access to the cash quickly, you don’t want it to be tied up in investments.
Consider Every Penny You Spend
Every time you spend money, you’re missing an opportunity to save, that’s why you should carefully consider every penny you spend and weigh up the benefits of that investment in the business. For example, when you are planning your marketing strategy, you need to think about the increase in sales that you are likely to see and whether it’s really worth it right now. In some cases, that money would be better off in your emergency fund so you have more protection from financial hardship in the future.
Anticipate Your Slow Periods
Knowing when you are likely to need your emergency fund is important because it helps with financial planning. If you know that there is a slow period coming up, you can increase contributions to your emergency fund and scale back on spending. But if you are expecting a sales increase over the next few months, you have a bit of freedom to invest more money back into the business. Creating accurate sales forecasts is the best way to anticipate slow periods and manage your emergency fund more effectively.