There’s a Tool for That
Last week we discussed the importance of saving money— both individually and in business— and the high percentage of people who don’t. The tendency to spend everything we have becomes a real problem when the unexpected happens. Now, I’m not saying every leftover dollar after bills should be saved.
What I’m talking about is having money set aside for big, unplanned purchases or unexpected emergencies.
That way, you’re using your own money instead of paying someone else to use theirs.
Last week, I told you about the tool I use for this in my business: The Savings Transfer Sheet. It’s a simple spreadsheet that makes saving money easy. What it doesn’t do is force you to save. (If only we could hook money up to electricity so there’d be a little shock when depositing money without setting some aside!)
The biggest problem with saving money is…not having a plan. It can feel overwhelming trying to figure out how much to save from each deposit, especially when your income isn’t consistent. If you received the same exact amount every week, you could decide once and always put the same percentage into savings. But in business, that’s rarely the case.
Every job and every customer is different. Some businesses, like lawn care, haircuts, or pet boarding, can set recurring prices, but even then, the number of repeat customers each week or month is going to vary.
The purpose of the Savings Transfer Sheet is to give you a simple, accurate way to know how much to save from every deposit.
As with most good systems, the hardest part is the initial setup. It requires some research, thought, and time. But trust me, the time and effort will be worth it in the end.
Here’s how to get started:
- Look back at your financial records. Review the last several years (or as far back as you can go). The more research you do, the clearer your understanding will be of your financial history. Even if you’re a newer business, start here. You’ll see patterns in unexpected expenses and see how much those surprises tend to cost.
- Identify what you need to save for. Some examples of what these could be are:
- Repairing or replacing equipment
- Buying new equipment or upgrades
- Vehicle repairs or replacements
- Large building repairs or maintenance (HVAC, roof, etc.)
- Facility upgrades, expansions, or purchases
- Taxes (income, property, sales, etc.)
- Irregular payments (bi-monthly, quarterly, annually, etc.)
- Retained earnings— money for emergencies (because they will happen)
- Assign percentages. For each category that falls outside your normal operating costs, determine what percentage of your net revenue it represents. That’s your starting point for setting up your Savings Transfer Sheet.
Building a “Rainy Day Fund” is critical to the survival of your business.
It’s a cornerstone in the foundation, allowing your business to weather the storms of life.
Next week, we will dig deeper into the Savings Transfer Sheet and see how the information fits together. This tool can help you BUILD a stronger, more successful business.
Want to know more about tools like this? Check out the Business BUILDing Toolbox or schedule a free 30-minute consultation to see how we can help you BUILD your business.