5 Reasons You Need A Business Savings Plan
Running a business is hard. Every day is a struggle to keep out of the red in the books. You might hear the old adage that you have to “take things one day at a time.” According to Stapley Accounting, a financial firm in Cache Valley, this is not the best advice. It may actually be the worst advice. They tell us that a common mistake businesses make is to overlook a business savings plan. Why do you need one? Let’s take a look.
1. A Business Savings Plan Prepares For the Unexpected
The main function of a business savings plan is to prepare for the unexpected. Just last year was the perfect example of what the unexpected can look like. Could anyone have predicted a global pandemic would shut down businesses and travel for almost an entire year? While something of that scale is rare, there are always economic downturns, recessions, and market fluctuations to consider. If your focus is entirely on keeping in the black from day to day, you’re not going to be prepared for this. A lot of businesses collapse when something shakes up their finances simply because they weren’t prepared to weather it. You should avoid this mistake.
2. You Can Put Saved Money To Work
It used to be common wisdom that you should put the bulk of your money in a savings account. This was good advice once, when interest rates could be high. Nowadays, most savings accounts will have less than 1% interest for businesses, though some might have better options. Even so, a savings account is a better place to put your cash than a checking account, which earns you nothing. Putting some money into a savings account will earn a bit of interest and be money you can quickly access when you need, providing you with a good baseline. But if you mix this with smart investments, you can earn a higher amount back that will give you a better buffer against trouble. However you do it, a good business savings plan can put that money to work in a way that earns more for you.
3. Save For Taxes
It can be easy to get so focused on the money that you can forget that the IRS is going to show up once a year. Or more, depending on how it feels on any given day. Having a saving plan lets you make sure money is being put aside for your taxes. You don’t want to take chances with the IRS.
4. You Can Take More Calculated Risks
They say you have to spend money to make money. It’s true. Sometimes you have to take risks to succeed in a business. It’s hard to take risks when you don’t have money, though. A business savings plan can help you put money away. When an opportunity presents itself, you have those savings available to take that risk without needing to worry about whether or not failure will ruin your money. Mixed with smart business sense and sound financial advice, your savings will let you take better advantage of the doors life opens for you.
5. Look Good To Investors
If your company has investors, having a business savings plan is a good way to signal that you’re a good investment. People investing in your company want to know those investments will pay off. For that, your business has to stick around for a while. If your business might be gone in a year or two, they aren’t going to feel good about investing. A good business savings plan will let you show current and potential investors that you’ve got the money to stick around through any ups and downs the economy might take. It makes you a safer investment.
A Business Savings Plan Is A Life Saver
Running a business is always risky. You put your money into it and you can never be sure how it will turn out for you. That said, good business sense can make it highly profitable to run your own business. Having a business savings plan is not just good business sense, it can be a life saver! It’s easy to be successful when times are good, but it takes solid planning to be successful when times get hard. Failure to have a good savings plan has killed large and small businesses alike when the road got rough on them. Don’t make that mistake. If you haven’t got a business savings plan already, now’s the best time to speak to your financial advisors about setting one up. The sooner you start saving, the more you’ll have saved up when you need it!