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How To Start A Rainy Day Fund For Your Small Business

A large cause of stress for many entrepreneurs is finances. When growing a business, daily expenses can put strains on capital, to the point where there may not be enough money to handle emergencies, lean months and other cash draining situations. Starting and maintaining an emergency fund can help ease stress by getting your business through lean times. Help expand your cash cushion so you can focus on your business.


Think of savings like an expense

When the bills are piling up, savings can be an easy thing to cut, but regularly contributing can increase your chances of successfully managing your savings. A blog post on the Small Business Administration website outlines the benefits of this mindset. "If you have your own savings fund, you can address the unexpected, saving you anxiety and cost. You'll be able to ride out slow economic periods and optimize boom times." Keeping savings as part of your regular budget can help your business thrive for the long haul.

Prepare for the long haul

Having a savings account for your small business is important, but many business experts advise having a substantial amount in savings. According to Score, a small business resource, your business should use its previous expenses as a benchmark for determining how much to save. "Your 'gross burn rate' only takes cash expenditures into account; in our example, that's $30,000 and is the more conservative amount, since it does not assume any sales are made. Historical spending patterns are a good starting point in considering future spending plans."

The right account can earn money for your business

Another good reason to start a savings account for your small business is that certain accounts can actually earn interest, helping to increase savings. FinancialWeb offers the following advice on its blog, "Many businesses simply leave their excess profit in a checking account. If you will start a savings account, you can start earning interest on the balance. While it may not seem like much, after a certain amount time, it can really add up."


Starting and maintaining a savings account for your small business is an essential tool. Along with helping weather bad times, money in savings can also be used to help you grow the business, as well as help ease some of the stress of daily operations. Start small, and over time, you may find yourself with a cash cushion that will help you out on a rainy day.


This article was written by Alaina Brandenburger for CBS Small Business Pulse.

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