You’ll never know when an emergency hits your small business. Events such as natural disasters, economic recessions, shifts in customer behavior and tastes, and others can impact your company negatively. You have to be ready when these happen because if you’re not, your business may lose money or might close.
These are the reasons it is important to have an emergency fund for small business owners.
Survive Natural Disasters
A natural disaster can happen anytime; earthquakes, wildfires, storms and others can derail your small business. You might momentarily lose customers, incur damage to properties and equipment, and lose inventory. In such cases, you can use your emergency fund to maintain operations, address damage to properties and equipment, and solve momentary cash flow problems.
Overcome Economic Downturns
The economy and consumer behavior can fluctuate and lead to losses for your small business. This downturn can make or break your company, especially if you just entered your chosen industry. This is when an emergency fund becomes helpful. The money you saved allows you to pay for immediate dues and implement long-term plans despite economic downturns.
Pay for Unexpected Expenses
Even if there are no natural disasters or economic downturns, you’ll never know when an emergency will arise. This can be sickness in the family, personal health problems, miscalculated product development and launching, and others. You’ll need an emergency fund to pay for these without sacrificing the financial flexibility of your small business.
It takes a conscious effort to build an emergency fund for your small business. It is often tempting to take money out of it. However, you should make it a point to always set money aside for it and avoid touching it until necessary. The amount you save should be enough to cover the expenses you might incur during economic downturns, natural disasters and other financial setbacks that might occur. Keep your accounting books updated to determine cash flow.
If you need help with bookkeeping, you can reach out to us here at Robookkeeper through [email protected]. We can provide you with first-rate bookkeeping services for small business owners. We can connect you with experienced, virtual bookkeepers to update your books and do other bookkeeping tasks you may need. We conduct a thorough selection process and manage outsourced service providers to make sure they deliver quality work.
