Build A Financial Reserve For Your Business

Just as individuals should build a financial reserve (safety net or “rainy day” fund) for themselves, businesses (especially, small businesses) should do the same.

The financial reserve should cover a minimum of two to three months of business expenses with the reserve comprised of cash from business income (read: don’t co-mingle client passthrough or earmarked funds with your business financial reserve).

This reserve will provide short-term liquidity while navigating a challenging period.

However, businesses need to remain proactive, taking the appropriate steps to address the root causes of their cash flow issues while mitigating against further impacts.

Cash flow projections are an essential tool in helping businesses track and monitor business cash flow (and cash flow needs), identify and assess emerging patterns, perform disaster checks, and raise the red flags which will hopefully give business owners and leaders time to take appropriate corrective action.

Be proactive, not reactive!