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April rain storms are synonymous with the arrival of spring, making carrying an umbrella essential to avoid being soaked by an unexpected shower. For small business owners, rainy days can appear as suddenly as a spring downpour, bringing with them a flood of unforeseen expenses that can cause considerable damage to a company’s bottom line. Keeping cash in reserve is not only practical for small businesses, it’s a strategy that can be critical to their survival.

Being prepared for a “rainy day” starts with creating an emergency fund. For many small business owners, this is easier said than done. You may never have considered setting up a savings account because your budget is always tight. However, if you shift your mindset and start treating savings as a monthly expense, you will slowly build a fund that can help your business stay afloat when the unexpected happens. Here are some tips to help you get started:

Lower Expenses

Financial experts say three to six months of operating expenses is the ideal amount to have in an emergency fund. One of the most obvious strategies for building these reserves is to reduce expenses and stash the savings.

To accomplish this, you will need to take stock of your business expenses on a regular basis in order to pinpoint unnecessary expenditures and know where you can cut costs. Invite your team to make growing the emergency fund a top priority. This may inspire them to find creative ways to be more economical, knowing that every dollar saved is going towards helping secure the company’s future.

Be Budget-Conscious

Whether it’s the lure of a great deal or the latest must-have tech gadget, it can be tough to resist the urge to invest money in your growing business. However, as a small business owner, controlling expenses is critical to your company’s survival. Investing in the future of your business means budgeting wisely and avoiding spending money needlessly. Seemingly small expenditures add up over time, so focus on sticking to your monthly business budget and using any extra income to build a cushion for times when unplanned expenses arise.

Cut Back on Outsourcing

Small businesses with a limited number of employees often rely on outsourcing as a way of accessing the expertise they need on an affordable and scalable basis. While outsourcing important tasks such as bookkeeping, payroll, and marketing may save precious time, it can come with a hefty price tag. Reevaluate your outsourcing expenses with an eye for where you might be able to cut back. If you are able to realize savings by tightening fees for consultants or contract workers, you can allocate the money to your emergency fund.

Save During Peak Seasons

If your small business is seasonal, it goes without saying that you’ll need to save earnings during the months when you generate higher profits to cover off-season expenses. If you have additional cash, seize the opportunity to stash it in your rainy day fund. This can go a long way towards helping you cover expenses when revenue is on the lean side.

Put Your Tax Refund to Good Use

With Tax Day fast approaching, many small business owners are likely to be expecting a refund. If you are one of them, now is the time to consider how to use the extra cash wisely. Although it may be tempting to apply this “found money” towards immediate expenses, you can safeguard the future of your business by using your tax refund to kick-start your emergency fund.

Have a Backup Plan

Once you have created your safety net, it’s important to manage it properly to ensure the funds are available when needed. Separate emergency funds from your other business bank accounts so you can keep tabs on exactly how much you have saved and avoid inadvertently spending the money elsewhere.

Don’t tap into the rainy day fund to cover expenses that are not true emergencies. One way to avoid this is to define situations that you and your team consider to be critical business emergencies. Commit to using the fund only when these circumstances arise.

In the event of a financial challenge that exceeds available funds, you can contact the U.S. Small Business Administration about taking out a disaster loan. You can also consider applying for working capital financing. Summit Financial Resources offers working capital loans that involve using your accounts receivable and other assets as collateral. We specialize in financing for small businesses, with lending programs designed to give you flexibility and fast access to cash so you can fulfill orders, make payroll, and pay vendors on time during any emergency.

A rainy day fund is the best insurance your small business has for weathering the proverbial storm, allowing you to continue operations in the face of unexpected financial issues or helping you recover from an unplanned, costly event.

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Summit Financial Resources specializes in working capital financing for small to medium-sized businesses that need increased cash flow. We provide working capital financing through invoice factoring, asset-based lending, inventory lending, and equipment financing.