Business Tip: Building Your Cash Reserves

Certainly you have heard from financial experts that you should have a three month cash reserves at all times. The premise behind this is to protect you should you get sick, loose or job or have unexpected expenses crop up.

This is even more important for your business. In fact, three months is not enough. You really need to look at five to six months of having a cash reserve. If you haven't done this yet, you'll need to start now. With all of the uncertainty and the economy today you will certainly want to protect your business.

Here are a few suggestions to get you started.

1. First of all if you are still employed while you are building your business, start by setting aside 5-10% of your net pay into a reserve fund.

2. To determine the ideal amount of your reserve fund, add up all of your monthly expenses and multiply it by the number of months you wish to have in reserve. Hint: you will want to do this for your personal expenses as well as your business expenses.

3. If this sounds like too much work, or your expenses vary too much, consider setting aside $100 a week. At the end of the year you will have $5,200, which is a nice cushion to start with.

4. Most of us in business, maybe taking a draw (vs a salary) from our business. It is essential, to set aside an adequate amount of money for taxes. Many businesses find themselves in trouble and they are unable to pay their taxes. Do not let that happen to you.

5. Do This Now! Regardless of what your current financial status is, this is something that all of us need to do. And once you get into the habit of saving, you'll be amazed at the results.