Set a reoccurring and automatic schedule so you never forget, and deposit the funds into an account that’s solely for emergency purposes. To build your emergency fund, start by figuring out how much you need (how much money would cover your immediate expenses for one month, for example, and then how many months do you want to have saved), and start putting even a small amount away each month with that goal in mind. Small businesses that have emergency funds will be more likely to cover unexpected expenses - like a high tax bill, increase in supply costs or repairs after a disaster, for example - which puts them at an advantage. Surveys show, though, that 17% of business owners say that if faced with two months of declining revenue they would have to close, and other statistics show that 25% of businesses won’t open again after a disaster. Avoiding Emergency Fundsīusinesses - like individuals - need to be prepared for the unexpected. Business owners who understand these will be more likely to avoid them, or at least have a plan for them when they crop up. Luckily, most cash flow issues stem from a few common causes. To do that, though, small business owners and their finance teams need to have a thorough understanding of their current payment processes and debts, as well as a plan for how to handle any potential disruptions in cash flow in the future. Proper cash flow management involves planning for both incoming and outgoing revenue so that your company always has the money on hand that it needs to run. For example, one survey found that over one-third of small business respondents identified “lack of capital” as the number one reason why the business had to close. Unfortunately, capital is one of the biggest headaches small business owners say they face. For any small business to be successful, owners must have a solid understanding of how cash is flowing into and out of the company.
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