How To Build An Emergency Fund For Your Business

Your business is booming. You are consistently hitting your growth targets and things are going better than you could have hoped. What would happen if everything suddenly turned against you? Market trends falling, the national economy grinding to a halt. All the gains you made could disappear simply because of factors beyond your control.

That’s where emergency funds come in to save the day. As a business owner it is important to prepare for the worst even if your business is booming. In fact, a booming business offers the best time to prepare. Building an emergency fund will give you access to resources right away to help your business weather through tougher times.

So how do you go about setting up an emergency fund?


1. Set a target

Begin by setting realistic targets for your emergency fund. You need to decide how much each month your business can put aside into this fund. You should ensure that you calculate any normal fluctuations your business experiences regularly.

You should also set a savings target for your emergency fund. This amount will be calculated based on what your business will need in order to operate during a worst-case scenario. You may also want extra, depending on your industry, in order to change up your business’ products or services to match any changing market trends.

It may be tempting to set the savings targets higher to save more, faster. However, you may risk trapping resources that could be used to grow your business. Talk to your bookkeeper about these goals in order to find a balance that will give you the emergency fund you need without slowing business growth.


2. Outline how you will reach your goals

Now that you have a target you will need to outline what you are going to do to reach it. There are many ways that you can build an emergency fund. You could cut into your profits; however, this is not the only solution.

Consider tweaking some of your business processes, streamlining them to eliminate wastage. Improve your invoicing processes and reduce some unnecessary expenses. If you find a large portion of your expenses going on unused programs, subscriptions or entertainment, consider reducing these expenses.

Another area you could look at is your existing contracts. Are you getting the best deal possible? There may be wiggle room for you to renegotiate these contracts or you could shop around for better contracts that increase your cashflow.


3. Don’t touch the fund

Now that you have your emergency fund don’t touch it. One common mistake business owners make is keeping all of their funds in a single account. This means that they keep their emergency funds in the same account they spend from. It becomes really easy to lose track of how much you have saved and then accidentally spend it.

Even if you do create a separate account you will still be tempted to use your emergency funds. The trick here is to maintain self-control. Use an entirely separate bank for your savings account if you need to. Make it more difficult to transfer money across to your spending account, except when you really need it.


4. Check the account regularly

Now that you are building your emergency fund you are well on your way to creating a pillow for your business to sit on when times are tough. It is important that you check regularly that your business can meet the monthly payments to the fund. Ensure that your business can sustain the current monthly cost and look at any changes you may need to make to meet it or revisit your goals.

You should also regularly check the fund to ensure that you are on track to hit your savings goal and that the fund has not been touched. A monthly check will put you at ease and ensure that you know what is happening with the account.



The best way to ensure that you are setting your emergency account up to make a real positive impact on your business talk to your bookkeeper. They have all the tools and knowledge to help you build an excellent emergency fund. If you need a professional bookkeeper you need to talk to Link Strategies today.