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Wait, what? My business should have a savings account, too? In many cases, yes. Is it always necessary? No. I talk about only having a business checking account in my blog, “Is One Business Bank Account Enough?” However, there are many benefits to having a business savings account for things such as taxes, emergencies, and future improvements for your business.
There’s also a difference between “having” a business savings account and using it wisely. Maybe you already have a savings account that you opened when you opened your business checking account, but let’s say it still has the same $100.00 (or $500.00) in it that you used to open it. Yes, it’s great that you have a savings account, but if the last few years have taught us anything, it is that anything can happen, and we need to have a plan.
Is your money just sitting in your savings account, collecting pennies? If so, may be time to consider how to better utilize these funds. Whether you have a savings account that you want to start prioritizing and growing for the future, or you’re starting completely from scratch – you need a plan! Luckily, I like making plans, especially when it comes to managing and saving money.
Your 5-Step Business Savings Plan
Here’s my trusted step-by-step plan to grow your savings balance from $100 (or $0) to something you can count on when the unexpected occurs:
A goal not written down is simply a wish. So, what is your goal? It could be a big goal, like saving six months’ worth of expenses “just in case”. Or maybe it’s a smaller goal, like enough to purchase a new piece of equipment. Or, it could be as simple as having enough to cover the tax bill in April.
Whatever it is, write it down, save it, and keep it somewhere where you can look at it. Make sure you give your goal a specific dollar amount, even if you’re not completely certain of what that dollar amount is. To estimate what you might need to cover six months of expenses, you can run an Income Report in QuickBooks® for the last six months. This will give you a good idea of what you’ll need to have in your savings account. You can also research today’s equipment costs and plug them into your report for a more accurate estimate.
2. Create a Timeline.
Once you’ve defined your goal, you need to decide on a “due date” to reach your goal. I would not recommend trying to save six months’ worth of expenses in one quarter; you’ll likely never meet that goal. You can, however, break it down into smaller goals. For example, maybe you set a goal to have one month’s worth of expenses saved by the end of this quarter. Breaking down your savings goal into monthly or quarterly goals will also allow you to see consistent progress.
Keep your deadlines realistic, but just outside of your comfort zone. Write down your deadline and milestones, and hold yourself accountable – or find a friend or colleague to check in with you on your progress.
3. Make Adjustments in Your Business.
As you start to work on your plan, you may find that it isn’t going quite the way you thought it would. This is where you’ll need to decide if you want to keep things at the status quo or make adjustments within your business to meet your goals.
Some adjustments may mean eliminating unnecessary expenses; we all have them – the “fun” things that we buy for our business. You may need to pay down some debt, or even raise prices. You’ll know best where you can make adjustments to help you reach your business savings goals.
4. Shift Your Mindset.
This is often one of the hardest steps for people to take. Once you have your plan, you need to commit to it. Spending with intention is not easy, but it can transform your business. The next time you are tempted to make an impulsive purchase for your business, take a moment, pull out your goal (you know, the one we wrote in step 1), and look at it closely. Now, imagine putting that money into your savings account instead of in someone else’s pocket.
Ask yourself the following questions: Is the purchase still worth it? Or, is it something that can wait? Can I do without this altogether? Taking a moment to think and remember your goal is one of the most important (but also most difficult) steps in building up your savings.
5. CELEBRATE.
As you reach each small milestone in your savings goal, it’s important to celebrate your success. However, you also want to be careful not to blow all your hard work on an expensive and impulsive purchase. Continue to keep your eye on that larger goal. Celebrating doesn’t have to mean splurging. Keep going until you reach your savings goal. It will be worth it in the end.
Celebrate and Set More Goals
Once you reach your ultimate savings goal, it’s time to celebrate, again, while also being mindful of what you have accomplished. You’ve built your savings up to provide an emergency fund, a tax fund, or money for business improvements. Just because it’s there, that doesn’t mean you have to spend it right away or all at once. Once you hit your first goal, think about what financial goal you want to focus on next.
When it comes to our business finances, there is never a finish line. Once you reach one goal, you set another. If you need help managing your business finances, get in touch with me today to see how I can help. Schedule a call today!
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