Ensure your business's consistent growth and success with efficient business financial planning and contingency fund development.
Follow our 5 simple steps below..
In the same way one would manage their individual or personal finances by setting an effective strategy in place, small businesses ultimately avoid grave financial issues when they are protected by efficient and specialised business financial planning.
The business plan you develop as you start your business should not only cover the business operations and objectives, but also the business’s financial aspects. As a business owner, if you are unsure of your finance and accounting knowledge, it might be good to consider seeking tax accounting services that are customised to meet your business’s specific needs and objectives. Keep everything in line with your business’s identity and end goals.
One surefire way to enhance your business’s capacity to take on new projects and face various challenges is by developing a contingency fund. This is your business’s reserve fund that is meant to cover unforeseen expenses and ultimately improve risk management.
Though it may seem like additional work, building a contingency fund is not too complex. You simply have to keep track of your business’s finances and follow these easy steps:
1. Determine the amount your business needs— or might need
Analyse your business’s cash inflow and outflow. Multiply the rounded up monthly expenses by three to get your total target savings.
2. Decide the strategy
Based on your business’s financial status, determine whether it will be best to build the contingency fund in bulk or gradually save up for it. It is advised to go with gradual saving to be able to continually grow your contingency fund.
3. Manage your payments
Make sure that you are aware of what an emergency really means for your business. Debt payments and investments, for example, are not emergencies. Your contingency fund will be better managed if your general cash flow is properly managed as well.Don’t mix things up.
It is better to properly segregate what needs to be segregated—in this case, payments.
4. Keep your savings automated
While we are on the subject of segregation. It is also highly advisable to establish a separate bank account for your contingency fund to better control it. Transferring money into it regularly—following a strict schedule—can help your business maintain the fund. You can also arrange a deal with your bank that allows your business to transfer a specific fixed amount to the contingency fund account.
5. Ensure that fund’s accessibility
What use is a fund if it is not accessible in times of emergency? Make sure that your contingency fund remains easily accessible when needed. You may opt to invest the fund for liquid investments because these are just as good as cash.
Remember, being prepared for what may come ahead is the best armour in the economic marketplace. Ensure your business is up for the battle with a contingency fund that the business can afford to maintain and manage. It takes more than enough money to build a contingency fund - iIt also requires hard work, team discipline and efficient business financial planning and management. To learn more about financial planning and management, you may get in touch with our experts and advisers at HTA.
It takes more than enough money to build a contingency fund - It also requires hard work, team discipline and efficient business financial planning and management. To learn more about financial planning and management, you may get in touch with our experts and advisers at HTA.