The Power of Cash: Four Types of Savings Your Business Needs
In business, cash is king. You not only need a steady supply of it; you also need to save it to help you when growth opportunities and problems emerge. Reserving cash is one of the smartest things you can do as a business owner.
Here are four types of cash savings that your business will need in order to stay on the right track.
Emergency Fund
Just like in your personal life, it is important to save at least three months of expenses for a rainy day. This should include repairs to equipment, payroll, inventory, overhead, and any other charge that your business may incur.
Growth Fund
This cash account will help you fund your business growth plans.
Do you want to add a new revenue stream? Do you want to hire more employees? How will you pay for the growth?
A growth fund will help you pay for both the planned and unplanned expenses related to growth.
Asset Replacement Fund
Cash allocated to this fund should be protected and only spent on assets that help you run your business. Your computers, trucks, and equipment are aging and will need to be replaced. These replacement costs must be accounted for, and your asset replacement fund does just that.
Income Tax Fund
Finally, don’t let tax time surprise you.
Reserve money each month so you can take the bite out of paying your quarterly estimated tax payments. This not only keeps you from running afoul of the IRS; it also provides you with accountability, peace of mind, and reassurance that all is taken care of, which is valuable in and of itself.
Tina White, CPA is the owner of Panoramic Business Solutions. She is a number crazy, profit finding accountant. She helps business owners enjoy the panoramic view of their finances and business. She can help your business grow with a customized pricing strategy, technology tips to shorten your learning curve, and a proven system to improve efficiency.
