Any small business that’s built for long-term growth and stable enough to weather ups and downs has a strong savings strategy in place. Building that strategy takes a little effort, but it doesn’t have to be complicated.
If you’re a small business owner who’s struggled with starting or cementing a savings strategy, try these quick, practical tips.
Business Savings Strategy Tips
Start with Goals
It’s tough to plot a path if you don’t know the destination. When you’re thinking about a business savings strategy, setting goals is a good first step. They should each follow the “SMART” goal framework — specific, measurable, achievable, relevant to your business, and time-bound. Do you need new equipment? Repairs or renovations to your business space? Outline three to five goals you need to save toward as a starting point.
Keep it Separated
If you don’t already have separate checking accounts in place for personal and business transactions, make that a priority. (Our business bankers can help.) That separation makes sure you can track spending properly, keep up with savings progress accurately, and have a better overall understanding of your personal and business finances.
Build a Buffer
Keeping a cash flow buffer in your business savings account (or a Capital Reserves Savings Account) can help you weather surprise expenses or low-revenue periods that can knock your savings strategy off track or lead you to high-interest borrowing. Most experts recommend three to six months of operating expenses as a financial safety net.
Calculate and Automate
With goals set, a buffer in place, and your finances clarified, you can firm up monthly savings contributions that work. Once you’ve calculated doable, consistent contributions toward each of your goals, consider setting up automated transfers from your business checking account to a dedicated savings account. This way you know your savings account is growing steadily, but you don’t have to do any manual upkeep.
Make Your Money Work for You
Standard savings accounts are safe and dependable, but there are other low-risk avenues available that can help you grow your business savings further, faster. Certificates of deposit (CDs), Money Market Accounts, and high-yield savings accounts might be options to consider. A financial advisor or business banker can tell you about investment options that offer higher returns with lower risk.
Review and Adjust as Needed
Being consistent with your business savings strategy doesn’t mean you should automate transfers and promptly put it out of your mind. As you work toward your goals, make sure you’re regularly reviewing your progress and finances and adjusting as necessary. You might be able to reach your goals faster than you initially thought. You might need to downshift a little to adapt to market changes. The important thing is to keep moving toward your goals, even if the pace shifts.
We’re Here to Help
If you’re running a small business, our team is here to help however we can — whether that means recommending lending options that might fit your business, setting up merchant and cash-flow management services, or helping you manage day-to-day business checking needs.
Drop by your nearest Merchants & Marine Bank location to talk with one of our business bankers, or reach out to our team online.
