Tom Petty was right. Coming down is the hardest thing.
COVID-19 has exposed quite a bit about myself. As a wife, I’ve learned I can be pretty harsh. As a mother, my patience/compassion reservoir runs small and shallow. As a business owner, I am reliant on my clients who are reliant on their customers. As a volunteer, I need the donors to provide the money to help those in need.
None of these things make me feel very good! I have seen myself during stressful times and it is not the best version of myself…I hate to admit.
What have we learned? We need to prepare for the unexpected! I’ve said this before and I’ll say it again. Businesses need to keep 3-6 months worth of operating expenses at all times. This money needs to be kept in a separate account, that isn’t touched, most of the time!
Look at your typical operating expenses over the course of 3-6 months. What are the things that you have to pay? Have that money saved and available for times of emergency.
Don’t have that emergency fund saved up? Start now! Determine a percentage of revenue to save each month. Set your dates on the calendar for the 10th and the 25th to make the transfers. Look at the revenue you’ve brought in between those dates and multiple it by your savings percentage. Transfer that money to your emergency fund twice a month.
This percentage will be different for each business. Contact me if you’d like some help determining it! As we’re all in re-group mode, take the time to do this step. As we know, “What goes up must come down”.
Jordan Ilderton, CPA