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An emergency fund is an essential part of a solid financial plan. It can help you pay unexpected expenses and avoid taking on more debt from high-interest credit cards or loans. You can build up your business cash reserve account in several ways:
Determine Your Needs. The first step is to determine how much you need in an emergency. Your needs will be unique, depending on your business. A rule of thumb, 10% of your annual revenue might be a good benchmark.
Set Reasonable Emergency Savings Goals. Start small so you can meet your monthly savings goal than struggling to hit a bigger number. Set small, achievable targets for your monthly savings, and increase the amounts when you’re comfortable that you can handle them without hurting your business.
Save Consistently to Build Your Cash Reserve Fund. As with any savings program, you need to put together a plan and follow it consistently. Commit to putting a certain amount of money aside each month. One of the easiest ways to do this is to save a percentage of your monthly revenue.
Automate Business Emergency Fund Savings. An effective way to build a financial cushion for your company is to open a separate account and set up a monthly deposit from your business account. Then savings can happen without requiring you to manually move the money each month.
When Business Is Good, Build Up Your Financial Cushion. When you have a good month financially and a better net profit, put a little extra into your emergency business funding until you reach your goal.
Check for Nonessential Expenses. Certain expenses are unavoidable. If you have a mortgage on your property, you need to make the monthly payment. You’ll need to pay utilities and employees if you want to stay in business. However, other items aren’t essential.
Protect Your Business Emergency Fund. It can be tempting to dip into your emergency fund for things that aren’t emergencies. Avoid the temptation to do that if at all possible.
Don’t Stop Building Your Cash Reserve Fund. When you reach your goal, take a breath and congratulate yourself. It’s a big step. Consider continuing to save and building your cash reserve fund to create an even bigger financial cushion.
Setting up a business cash reserve fund also provides peace of mind. You’ll sleep better knowing you have some money set aside to handle emergencies. If you’d like to learn more about how we can take managing your business finances off your plate and help you grow your business, schedule a call with us today!
The Accounting Field, Uncategorized
Do you need help to make sense of all the numbers and jargon that come with it? Fear not, my friend, for I, your friendly bookkeeper, am here to break it down for you in a way that’s easy to understand.
So, what is the purpose of a profit and loss statement? Simply put, it’s a financial report that tells you whether your business made a profit or a loss during a specific period of time. It’s also known as an income statement, which is a bit more self-explanatory. Think of it as a report card for your business’s financial performance. Just like you need grades to determine how well you’re doing in school, you need a P&L statement to determine how well your business is doing financially.
This handy report comprises two main sections: revenue and expenses. Revenue refers to the money your business earns from selling goods or services, while expenses refer to the costs incurred in running your business. The difference between the two totals is your profit or loss. If your revenue is higher than your expenses, you have a profit. The other way, you’re losing money.
I probably don’t need to tell you that this is important. We all want our businesses to make money. The P&L shows in a straightforward report if you need to cut back on expenses or book that cruise.
The P&L statement can also help identify patterns in revenue. For example, maybe you have greater sales during the summer or more expenses in the winter. The P&L can help determine that.
With accounting software like QuickBooks, a Profit and Loss statement is easy to put together, and with a little study and the help of your accountant or bookkeeper, you can make informed decisions that will help you grow and succeed.
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It’s that time of year again, almost the end of summer, where school is about to start up and suddenly everyone’s schedules have changed and everything seems to be moving a million miles a minute. Now’s the time to get back into the swing of things!
Here are several tips (both personal and business) on how to keep from falling out of line this fall:
Put money aside in an emergency fund or savings account. This can come in handy for unexpected or unaccounted for expenses that could come up in the rush of things.
Organize your papers and receipts. This will help you in the future when it’s closer to tax season as well.
Try tracking your budget. Find out where all of your extra cash is going!
Communicate with your employees. Are their schedules or needs changing at this time of year at all? The new season is also a good time to go over employee reviews, gain feedback, introduce any changes, talk about policies, etc.
Continue networking. Attend networking events. Build relationships with neighboring businesses.
Check your finances. See if you need all of the subscriptions that you’re a part of, and double check your taxes and deductions, etc.
Looking for help with your business bookkeeping? We’ve been working with small business owners to free up more time, get more bookkeeping clarity, and create more cash flow in their businesses. Ready to learn more? Book a call to get started!
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