Setting Up a “Rainy Day Fund” for Your Business Can Help Keep It Afloat
We’ve just passed a painful time of the year…INCOME TAX SEASON. This can be stressful but doesn’t have to be if you’re prepared.
It’s common for people to spend everything they earn and not save anything for future investments or emergencies. For the most part, as a society here in America we have become comfortable.
We have forgotten how important it is to save money.
There have been times throughout history when things weren’t good financially, i.e. the Great Depression of the 1930’s. Enough time has passed, that for most people it’s become a distant memory. If you have ever talked with someone who went through the depression or a similar experience, saving money became more than something that needed to be done…it was the difference between life and death.
As reported in Zippia 42% of Americans have less than $1000 in savings and 10% don’t have any. Businesses aren’t doing any better, and it’s every bit as important.
Part of a good business financial plan includes saving money for those irregular and unexpected expenses.
Just like in our personal lives, in business we get busy with the process of daily living. We work hard at the normal operation of the business and neglect to intentionally plan for those “rainy days”. Things like equipment maintenance and repairs, building maintenance and repairs, quarterly and annual taxes, irregular payments, etc.
When I started doing construction work I learned the skill of building from some of the best craftsmen. Later when I went into business for myself, I thought I knew everything that I needed to be successful. The problem is that while they taught me how to build a solid, well-built structure, I was never taught how to build a business.
Early on in my business career I learned one of those business building lessons the hard way…the importance of saving money.
I was working hard to keep construction moving forward. The material figured and ordered and suppliers paid. Subcontractors and employees organized, having what they needed and paid. Things were going well, and there was even some money left over. So naturally, I spent it. Then it happened…the accountant showed me how good my year was by telling me how much I owed in taxes.
How was I going to pay them? I didn’t have that kind of money. What was I going to do? I was going to have to make payments. Just so you know, tuition to the “School of Hard Knocks” is expensive.
That’s why over the last 40 years of learning lessons the hard way I designed and developed a system to help me build a successful business. One of those systems was a way to separate and save money that would be needed later.
The question then was how am I going to do it?
Several years ago, my wife and I found out about Dave Ramsey and his Financial Peace Program. It’s a program that teaches you to, “Live like no one else, so that later you can live like no one else.” The very first lesson he teaches is “Super Saving”. It’s a common-sense approach to saving money and the reasons it is important to do so. This was great for my personal finances but wasn’t an exact fit for the business.
So, using the basic principles of Dave’s plan for personal savings, I began working on a way to do the same thing in my business. The Savings Transfer Sheet is the tool I came up with and is one of the tools in the Business BUILDing Toolbox.
The “Savings Transfer Sheet” is a simple spreadsheet that with a few simple entries will give you the dollar amount that needs to be separated from gross revenue and saved. That money can then be put into a separate checking account, savings account, or turned into cash and put in a safe.
This keeps saved money from accidentally being spent on the wrong thing.
After talking with a lot of different business owners I realized that every business could use a “tool” like this. That’s why we’re currently working on putting business tools in the Business BUILDing Toolbox that will make the Savings Account Transfer tool available to construction companies.
You can find out more about the Savings Account Transfer sheet or other tools in the Business BUILDing Toolbox by setting up a free 30 minute construction company consultation.