SHOULD MY BUSINESS HAVE A ‘SAVINGS’ ACCOUNT?
Absolutely. The importance of saving money should not be overlooked. Saving is one of the most popular financial advice out there. Despite the importance of saving money, many businesses do not follow through on it. Just knowing you should save is not enough, you have to do the right thing financially and actually put some money away to save.
Planned expenses: A planned expense is money you intend or expect to spend. Planned expenditure is what a business expects and plans to spend during a fiscal period. These include an expansion project or a planned acquisition of equipment. See examples below:
Ms. A saves a portion of her profit so that if there is a delayed payment from her customers in a month, she is still able to pay staff salaries.
Mr. B just wants some safe haven i.e. peace of mind.
Unplanned expenses: Unexpected expenses are things that you cannot predict. That means you cannot simply fit these expenses into your regular budget; it takes a different kind of planning to prepare for them. These include emergency equipment purchases or a medical emergency. Some examples of unplanned expenses are given below:
Mrs. C runs a bakery and the only oven she owns has developed a fault. No oven, no sales, no revenue. She has got to cough out money to fix the oven.
Mrs. C now wants to buy a new oven and she suddenly gets a good deal, an oven discounted for half the original price.
Saving is very important in your business, and the scenarios painted above shows just that. However, despite it being one of the simplest and most popular bits of financial advice out there, it seems to be something that is hard to do for some businesses.
It is even harder to achieve without understanding why you should save money. Knowing why it is important to save can motivate and improve your attitude towards saving because it requires discipline and consistency. Some of the key reasons you should have a business savings accounts include:
1. SAVING CAN GIVE YOU FREEDOM
This has nothing to do with the money and everything to do with giving yourself flexibility and choice in your life. It gives you the freedom to live on your terms.
You can save to build a wealth fund, this gives you the freedom and money reserve to do what you want when you choose to, and how. You do not want to get caught in a financial emergency and have to make choices you do not want to or have to make choices that might hurt the business in the long or short run. So build that wealth fund to ensure your freedom.
2. ENSURES FINANCIAL SECURITY
Having a business savings account allows your business to enjoy financial security. Save money and money will save you. Setting cash aside for an emergency fund gives you something to fall back on in case an unplanned expense comes up.
An emergency fund is a stash of money set aside to cover financial surprises life might throw your business’ way. Most experts advise you should have enough money in your emergency fund to cover at least 3 to 6 months’ worth of operating funds to run the business.
3. SAVING ALLOWS YOUR BUSINESS TO GROW
Saving means you can take calculated risks, or try new things with less worry. If you don’t have any money saved up in your business savings account, it may be harder to try new things or pursue certain goals, and execute growth plans and projects.
Big companies stay big and grow bigger because they have the funds to work on big projects. A small company can also take on more projects if funding is available; so save money today to work towards your future growth.
If you are convinced as to why you should save money, you can get in a saving habit by opening a business savings account or automating your saving process. Once you’re in the practice of saving, you’ll forget there was ever a time when you didn’t save.
Start your business savings today, you don’t know when it might ‘save’ you. If you, however, have no savings to date, BizNurture is here to assist with the short term finance you need for your small business.
It also gets more exciting with BizVest as we help business owners manage their business savings better.
This article first appeared on The BizNurture Blog at [https://blog.biznurture.com/should-my-business-have-a-savings-account/].