I agree with you that in the 'Best of Worlds' it would be good to have enough cash on hand to survive, rebuild or just get by after a weather disaster. Sad thing is most small businesses survive like households form one month to the next without being able to put much aside for a rainy day.
Some small businesses might have insurance to cover their cost in case of weather loss, but not all so yes making necessary changes should probably be made to set some funds aside for any emergency....would you have any advice on how to go about this or do any of our other posters have so advice on this subject?
You must try hard to put some funds.also take a good look at the things that you buy for your business and if do not it them. may have more funds on hand for a rainy. Don.rastawear
If you prepare a Cash Flow Projection spreadsheet you will have a picture of how much cash is brought in each month and how much is needed to cover expenses over the course of the last few months. Ideally, you should have at least one month of expenses in reserve in case of emergency.
Take a look at your expenses to find out where you can start to save and take what extra funds (no mater how small) and start to put them into a savings account. The important thing is to start. You don't have to do it all at once.
Setting aside for a rainy day is the smartest thing to do without a doubt. When we opened doors, we had the opportunity to receive a line of credit from our bank. It was a business decision to only use this credit in case of emergencies but only after all of our set aside funds had been exhausted. I have to say , that was the wises decision we ever made. Not only did it give us confidence as a company, but it also circumvented panic during those tough times.
Yes, a line of credit is a great idea and the time to get one in place, is before you really need it. It's also important to understand that this is a type of insurance and should only be used when truly needed.
If you should need to tap into your line of credit, add this to your Cash Flow Projection and project (plan) how and when you will be able to pay down the balance.
Having an "emergency fund" is essential regardless of the size of the business or where they are located. It does not take a Weather Disaster to severly impact a business. We recently lost a client due to a large scale road construction project that forced traffic away from their store and resulted in a 70% drop in sales for over 10 months! The owner was not prepared for such a drop in revenue even though they were aware of the project 24 months in advance! Planning for trends in revenue and expenses is vital for businesses of all sizes. Every business should have some cushion in place whether it be a savings account (emergency fund) or a line of credit that is designated to be used only in such a situation. However, some businesses abuse the line of credit and drain the funds before they are truly needed.
Jennifer King, MSA
Weather disasters can devastate small businesses by not having enough cash when damages and closures occur. In my opinion, a Cash Flow Projection can help businesses understand their monthly cash flow, make necessary changes and set cash aside for emergencies.
What are your suggestions?