2020 wreaked havoc on the financial solvency of many businesses. No one could have predicted the worldwide pandemic that began that year, and no one can predict when something just as financially devastating may happen to a business again. Investing in an emergency fund is one way to ensure there will be money to tap into if there is a business crisis. Saving for an emergency fund is critical because life and business are both unpredictable. We developed six steps to help you start saving for your business’ emergency fund—the right way.

1. Prioritize a business emergency fund—You make sure your income is paid first, retirement, then your bills, but equally important is that emergency fund. It is easy to set aside anything left after bills and expenses are paid into an emergency fund. Still, that minute amount may not enable you to save the amount you want or need for an emergency fund to multiply. Rearrange your finances so that an emergency fund is your business’s financial priority, along with income and retirement.

2. Determine how much you should save—What are your monthly expenses? And what are the business bills you could not get by without paying? Determine that amount and multiply by six—that should be the least amount of money in your emergency fund.

3. Build your reserve—Now that you understand the amount of money that should be in an emergency fund, start saving immediately. If at first, you can only save $100 a month, still save it. Try to set aside more when you can. If you receive a tax refund, just add it to the emergency fund. Any money not expected can be placed into that fund to increase its growth.

4. Ensure your money is accessible—CDs and other special saving accounts are good ways to earn extra interest, but many have a set amount of time the funds need to be in those accounts. The whole point of having an emergency fund is that you have it when you need it—and you do not know when that will be—so it should be easily accessible when you do. You do not want to incur a penalty and lose money if funds are tied up or if there is a fee for withdrawing from it early. Set up the fund in a savings account that does not incur a fee or penalty and may be withdrawn at any time.

5. Adhere to your set standards—You decided that you will save $100 a month and that you will place any excess money into an emergency fund. That was the easy part. The difficult part for many is adhering to those self-set guidelines. Treat this emergency fund like any other bill and pay it. Have the emergency savings funds automatically deducted, so the money never reaches your checking account. Make the parameters you set to grow your business’ emergency fund non-negotiable.

6. Ask for help if needed—Be clear about the amount of money it will take to keep your business solvent in an emergency. If you are unsure of how to maximize saving for your emergency fund as quickly as possible, seek professional financial guidance. We offer professional bookkeeping, accounting, and financial services that include emergency savings funds to help you achieve your goals. Contact us anytime.

Katie Robinette

Co-Founder