Unexpected things happen in the business world. Your technology needs updating, you misprint hundreds of business cards, the office carpeting needs to be replaced. All these unforeseeable incidents cost money –money that you don’t always account for in your company’s monthly or yearly budget. Instead of putting your business credit card in the red or taking a dip out of your own paycheck, consider creating a business savings account.
How to Build Your Small Business Savings Account
As a small business, chances are that your company doesn’t have a lot of extra cash lying around. Expenses are, generally, tight. Though you may have an employee (or two) whose sole job is to manage the finances for your company, chances are there may be some opportunities to cut costs that have been overlooked, or not even considered.
Here are four simple steps to help you start saving:
Step 1: Review your monthly budget
How much paper is your company wasting? What’s the RIO of those costly television or newspaper advertisements? How much plastic silverware or paper plates does your office go through in a week? Seriously! Little expenses like these can add up and cost your small business thousands of dollars a year. Implementing small changes, like going digital, and using ceramic instead of paper coffee cups, can add up to big savings quickly.
Step 2: Add up extraneous costs and put them into the bank
Once you’ve determined where you can cut costs in your business, tally up the money you’ll be saving every month and put that amount into the bank EVERY single month. If you are inclined to move money around when things are tight, you might need to open your business savings account at a completely different bank to make it more difficult to access the funds.
Step 3: Explore your banking options
On the flipside, if you would rather have money removed from one account and placed in another without you ever seeing the transaction, you can do this by having an operating account that is tied to a savings account. Most banks have a savings plan that can be tied to a company’s checking account, which often means better interest rates. Local banks particularly have better interest rates when businesses connect their savings account to their checking account, so be sure to do your research.
Step 4: Set rules for your business savings account and stick to them
You are going to have to be strict with yourself if you want to save money. There is no easy way to take money from profits and move it to savings but that’s what you are going to have to do if you want to survive a rainy day. And there will be a day that it rains. It may pour. And you will be happy that you have an account to cover you. Without a process in place for how your company will save, you will likely fail, so it’s important to set up some rules.
While you’re setting rules, consider setting goals too. It’s always easier to save money with a reward at the finish line. Maybe your company saved an extra $1,000 one month. Why not collaborate with your team to see how they would like to spend a portion of the money? Something as simple as a new coffee maker in the office could be enough to fulfill a short term goal. Short-term goals allow the company to feel the benefit and reward of being frugal, and will motivate your team to continue saving.
One to five year savings goals
These are goals that are bigger in nature and take time to save up to before purchasing. At this stage of growth, a business savings account can provide investment opportunities that help the company grow. Most of these purchases are non emergencies so they translate into assets that add value to the business. This include things like new computers or upgraded technology, remodeling of office space, or revamping of a website.
Long-term: 5+ years
These are goals that give your company direction. When you can finally splurge on a few of your company’s long-term goals, it is a promising sign that your company is healthy and continuing to mature. Examples of long-term goals are purchasing (opposed to renting) office space, offering competitive health and retirement benefits, or adding more high paying jobs to your company’s payroll.
Do you need help putting a business savings account in place?
Virtual BeanCounters serves entrepreneurs with an empowering finance division so they can focus on innovation and creating value for their clients. We believe you can accomplish the business of your dreams a lot easier with a professional accountant on your team! Contact us by phone at (913) 649-1040 or click here to visit our Contact page.