Saving Money for a Rainy Day in Business
When it comes to small business finances, many companies operate just like many American households. Where some families live paycheck to paycheck, businesses often live from payroll to payroll. But smart business owners understand the benefits of saving money in business. In contrast, wise business owners think two steps ahead and prepare now for an unexpected future. Success is a double-edged sword that can cause business owners and entrepreneurs to think differently about money and resources. Success can be a great motivator to continue pushing and growing. Still, unfortunately, many small business owners never understand the benefits of thinking ahead and reinvesting profits wisely—much less saving money for a rainy day.
Entrepreneurs who wish to grow, solidify, and expand their companies need to make wise decisions about their resources. And yes, that includes a corporate savings account. Many small business owners starting out are so strapped for cash that every single penny is tied into the operation in one way or another. But every business should strive to build and maintain a strong safety net, even if some sacrifices need to be made. Many small business owners never even consider opening a savings account as part of the business holdings. It is not only smart but also crucial to have a little cushion to push forward.
Here are four main reasons why you should consider a corporate savings account for your company (Gosnell, 2019):
1. Saving Money in Business Can Protect
Your Company From Unexpected Emergencies or Market Setbacks Every business has highs and lows. Sometimes during those lows, sales become difficult, and cash is depleted. Corporate savings accounts are liquid assets that can be tapped to pay expenses that are more than the current receivables will cover.
2. Saving Money in Business Provides You With the Added Cash Flow That Might be Needed to Grow
Some purchases and investments can only be made, without falling into bad debt, through years of savings. Big companies work on big projects that usually only big companies can accomplish because they have the resources to do so. For example, Disney has expanded into developing its own streaming platform, and Apple is developing a new fitness membership service powered by Apple Watch. Large corporations often stay big because they have the financial cushion to invest in big ideas outside their day-to-day expenses. Small businesses that wish to be big should focus on more significant projects with staying power. Many start up small businesses have no set financial plan beyond staying open week after week. But even a small venture can start saving money in business today for future plans.
3. Saving Money in Business Gives Your Company an Advantage and Wiggle-Room to React to Changes in Your Industry
Many small businesses grow significantly during difficult financial times like recessions, because they have set aside the resources to not only survive but to expand. By having a strong cash position, a company with enough savings can expand by acquiring a poorly performing competitor, developing product knowledge and intellectual property, and even by putting their money toward the recruitment of the best talent in the down-market.
4. Savings Allow Companies to Give Back to Their Communities, Strengthening the Bonds With Their Consumers
If there is a local, or even global, cause that you and your employees feel strongly about, any time is a great time to start giving back when and where you can. Companies that develop the habit of saving money will find many beneficial reasons for giving back a portion of their profits, focusing on the future.
Do you currently have funds for a rainy day for your business?
What can you do now to start saving?