5 reasons an Emergency Fund should be part of your Cash Flow Management.

No matter how well your business is operating, there will be things that happen that are beyond your control. Could an emergency fund help you?   Learn more in this week’s blog. 

Suppose your business is operating well and your cash is staying positive. Most people would agree that this is a great position to be in. Some would even say “Why fix what isn’t broken?”But you, being a smart business owner, know that life happens.

That being the case, you probably agree that having an emergency fund is a good business decision.  You have experienced things that you can’t control. You have probably also discovered that how you respond to emergencies and difficulties is much more significant than the problem itself.

Since business threats come in many different ways, having an emergency fund will help you respond effectively. 

Today I want you to look at 5 common threats to your business that justify having an emergency fund. 

1. Your equipment breaks down

Even when you take care of your equipment, there are times when it stops working. When this happens you want to be able to resume operations as quickly as possible. A well funded emergency fund will help you be able to do that.  Yes, this means you will be taking cash out of your operations, but when you realize that this cash will help you solve future equipment problems, it is worth the reduction.

2. The weather gets out of hand.

No matter where you live, there are weather events that can shut your business down! The events have different names: hurricanes, tornadoes, snow storms, floods, fires, etc., but the results are the same. You are shut down because of the weather. An emergency fund can help you get through the storm and its aftermath. Some may argue that “that is what insurance is for.”You need to keep in mind that waiting for money from an insurance company can often be a lengthy process depending upon the number and severity of the claims they are receiving.  The emergency fund keeps you in control of your cash flow.  Use the insurance funds to replenish the fund.

3. The economy gets tight.

Even great businesses can be affected by a down turn in the economy. If people don’t use your services as much because of that economic down turn, your emergency fund can help you survive when times get tough. I use the term well funded because the ideal goal for your emergency fund is to have 6 to 12 months worth of income on hand in case you need it.  You will  be glad you did.

4. Accidents, sickness or deaths can occur. 

Sometimes things happen in your life that take you away from your business. It could be a sickness, a funeral or even emergency surgery for yourself or a loved one. Your emergency fund can help you get through the emergency. 

Some of you have experienced these types of catastrophic events while in business.  I invite you to share your story and the steps you took to get through the situation in the comments.  Let us know what worked for you and what didn’t work so we can all learn from your experience.

5. You cannot predict future events.

You must prepare in order to survive.  Not only for yourself, but for your family and business.  No one knows what may happen in the future. But when you are prepared with an emergency fund you can get through most anything.  Continuity can take on many meanings when it comes to people and business operations. 

“Beyond your control” is a phrase that comes into play in many ways.  Just because you cannot control a situation does not mean that you cannot respond in the best way possible.  The next time you sit down to take a good look at your business, (which should be done annually or semi-annually in addition to your monthly business review), include a well funded emergency fund in your planning and begin funding it immediately.  Keep adding to this fund regularly.  Make room in your budget for it.  You’ll be happy that you did!

Take advantage of your cash flow budget and create an emergency fund that you fund each month. It will help you to survive whatever comes your way!

To learn more about cash flow and budgeting, sign up for my upcoming free online Cash Flow Workshop HERE.  I will email you when the next workshop is scheduled to begin as well as sending you a link to each new weekly post in the Budgeting Essentials Blog! I will be teaching my Cash Flow Workshop soon, so don’t miss it!

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God Bless your week!