Building a cash reserve in tricky times

It’s been a turbulent year, and we don’t know exactly when things will fully settle. And if we have learned anything in the past year, it’s that having a decent cash reserve is super important just in case any curveballs are thrown your way.

Having cash reserves in your business not only provides you reassurance that you’re going to stay afloat, but it can also give you wiggle room to adapt, as well as providing simple peace of mind.

But how do you create this cash reserve if money is already tight? It’s not easy, that’s for sure. But there are certainly things you can do to make it happen.

1. Shift any extra money you have into your cash reserve

If you have any money left over, perhaps from government grants from Covid, be sure to pop that away. Also with so many restrictions, this could mean that some of your usual business expenses have been cut – for example travel expenses. Money that you have saved because of these kinds of cuts are a great start.

2. Preserve cash where possible

If you’re looking to boost your cash reserves, looking though your expenses and seeing what can be reduced is a great start. It can be a difficult and laborious task to go through all of your expenses, but you’d be surprised at what may pop up. Things like getting rid of subscription services you’ve long forgotten about, or even downgrading the ones you still use can be a good start.

3. Take advantage of assistance programs

Currently, there are plenty of Government Assistance programs to help assist your business during times of crisis like the Covid-19 Pandemic. Be sure to pay close attention to loan repayment terms and don’t sign up for things that your business won’t be able to pay back. This being said, there are definitely programs worth looking into, pending eligibility, that can be very helpful.

 

Financial institutions, corporations and loan providers also have been providing different ways to support small businesses. Do your research and you might be pleasantly surprised by what you can find.

 

This money can help cover your expenses and hopefully there will be some surplus to pop away into your cash reserve.



4. Discuss with your suppliers

Negotiating payments with your suppliers is also always an option. Chat to your suppliers and find out if there are any ways you can extend payment deadlines without harming your overall relationship with them. There may be some kind of arrangements which can save you money without costing them. Even slightly extended payment terms will help your cashflow, stopping you from dipping into your cash reserves.

5. Treat it like a fixed expense

As a business owner, you would have plenty of fixed expenses that are automatically taken into account eg. bills. Treat contributions into your cash reserve like this.

 

Create an automatic transfer and set aside a set amount every single month. This is a great way to force savings and force your cash reserve to grow.



6. Set boundaries

Once you start to build a cash reserve, it can be all too tempting to access it. So before you start to build momentum, set yourself some rules and limits for when you are allowed to dip in. This way whenever you’re tempted, you have some stops in place.

 

All in all…

 

It’s so important to build up your cash reserves in case of an emergency. Give your business (and yourself!) the safety net and reassurance you deserve in such tricky times.

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