‘Extraordinary circumstances ask for extraordinary measures.’
The world is going through a crisis currently as the COVID-19 virus has curtailed people within their houses. Businesses are losing more than ever and by the time the world is done with this global pandemic, the UN says that it could cost up to $2 Trillion to the global economy, 2020. This can’t be undone but there is always something to learn from.
Businesses can control what’s going within the organisation but can’t control certain events and the COVID-19 is one such major event that is still feeding on the global economy while businesses are perishing. The most affected are the small business that hardly had any emergency fund aligned to keep things running. And this is what needs to be incorporated in every business model from now on irrespective of the size of the business.
All my prayers go to the victims of COVID-19 and I wish the world recovers fast from the repercussions of this fatal virus. And to contribute a title, I would like to enlighten business owners as to how they can build and grow an emergency fund that will benefit them not only in emergency scenarios but taking bold monetary risk that will help grow your business, as and when required.
For small businesses, it isn’t possible to put aside a large sum of money in one go. It is always a better option to start with setting aside a small amount which can be invested regularly. It surely would take some time but you’ll end up saving an adequate amount for your emergency fund. Following the fundamental rule of financial planning, it is advisable to try and save at least 10 percent of the business earnings for emergencies.
Business Travels cost enough money. However, keeping a check on unnecessary business travels can save businesses a handsome amount of money which can be invested in company emergency funds. Technology has so much to offer and businesses should understand the fact that it is not always important to go for a face to face meeting with every client. Instead leveraging technology by using various video conferencing apps can also get the job done.
Yes, emergency funds are for emergencies and not for availing random services and products. It is always better to keep the emergency funds in a seperate account which shouldn’t be touched Until and unless there is an urgent need.
Saving is obviously a good idea but you should always set a realistic amount of saving that doesn't affect the day to day functioning of the business model. It will only make it tough for your business to survive in this competitive market.
Try to follow a saving model wherein you can invest more into saving during the good times. This will help in saving more money as well as compensate for any savings that you might miss when the business isn’t doing that good.
I know it may sound weird but automation can assist businesses in cost-cutting. Let me make it more clear by stating a simple example:
Many companies and mostly small businesses still hire HRs to perform manual tasks like Talent hunting, interview scheduling, Payroll Management, Leave Management and what not. This only leads to hiring more employees to manage the HR department. However, if businesses switch over to automated HRMS’, they can save money as well as the unnecessary human effort. This saved money can again be used to grow emergency funds.
Many such tools and technologies are available which can be incorporated into the existing business models to save a considerable amount.
Additionally, recent VAT payment deferral and reforms in the Time to pay arrangement which spreads business tax payments over an elongated time period which were reformed in the Budget 2020 amid the Corona outbreak can be utilised by businesses to manage their cash flow efficiently during these tough times. This distribution of Tax payments can prove pivotal in saving a few bucks that can be transferred into the emergency fund.
Be it a business or an individual, managing emergency funds should be a top priority and no thanks to the current global scenario we have a lot to learn to ensure a functional business even in times of emergencies.