Hey Hey Hey Hump-dayers! It’s your girl, Erica Fields, your money motivator and your growth instigator bringing you the KEYS TO YOUR FINANCIAL HOUSE!! I hope this week has given you the fuel you need to finish it out with a bang!!
HUMP DAY IS UPON US!! And I know we are all working hard to clear the hump and have a smooth downhill ride to the weekend. I know I am. Well let me put a little flavor in your ear about something we all love: CASH!! We all want to have it and more of it but just how do we manage to keep it in our businesses?
Building a financial cushion for your business is never easy. It takes hard work, focus and determination. Experts say that businesses should have anywhere from six to nine months’ worth of income safely stored away in the bank. Not an easy pill to swallow. If your business is grossing less than $250,000 per month, can you save $1.5 million? The mere thought might have you paralyzed. What may be a nice well-advised idea in theory can easily be tossed right out the window when you’re just barely making payroll each month.
So how is a small business owner to even begin a prudent savings program for long-term success? Realizing that your business needs a savings plan is the first step toward better management. The reasons for growing a financial nest egg are strong. Building savings allows you to plan for future growth in your business and have ready the investment capital necessary to launch those plans. Having a source of back-up income can often carry a business through a rough time.
Reasons to Save
Some of us refer to them as “rainy days”. When market fluctuations, such as the dramatic increase in gasoline and oil prices, start to affect your business, you may need to dip into your savings to keep operations running smoothly until the difficulties pass. Savings can also support seasonal businesses with the ability to purchase inventory and cover payroll until the flush of new cash arrives. Try to remember that you didn’t build your business overnight and you cannot build a savings account instantly either. But you can start buildin your savings plan now.
Retained Earnings Statement
A retained earnings statement is a tool used by your financial advisor to help understand your business financial position. It’s your cash reserves go to for reaching your goal. Reviewing your books monthly is a great asset to the process of stashing cash. Understanding where you can trim expenses is a proven science to building better reserves. This will also help to keep you on track with cash flow and other financial issues. While it can be quite alarming to see your cash flowing outward with seemingly no end in sight, it’s better to see it happening and put corrective measures into place, rather than discovering your losses five or six months too late.