By Leon Jenkins
Come January 1, 2012 the absolute best New Year’s Resolution you can make is to determine how much of a business cash reserve you need to have stashed in your Business Bank account come December 31, 2012. And believe you me; this is much easier said than done.
At any rate, it is important that you know the “how to” when it comes down to building up a business cash reserve.
So let’s get to it.
First – set a realistic Goal for the amount of money to put away as a business cash reserve. A sound model to follow is to take your monthly operating business expenses and multiply them by 6 to 12 months.
Second – create a Budget. Determine the amount of monthly savings you can afford to place in your business cash reserve account. If you determine that you can’t afford even a penny’s worth of savings then start with $50.00. That’s right – you can’t afford not to save at least $50.00 a month into a business cash reserve. Of course you will quickly realize that $50.00 a month is not even close to being enough to realize your cash reserve goal in a reasonable amount of time. Your budget will help you visually determine what you can sacrifice as a trade off for your monthly cash reserve savings.
Third – Stick to your Budget by ALL means necessary. Your business’ long-term viability depends on it. The best option to put in place is to have your monthly cash reserve savings automatically debited before you start spending on other business expenses.
Remember – A business cash reserve is one major way of protecting your business from going out of business especially during economic down turns such as those we are experiencing now. Oh, by the way, building cash reserve is something you should also do for your short and long-term personal financial stability.
Now – as we close out 2011, my prayer is that everyone who follows my sound and tested advice enjoys a busy and prosperous 2012!