There are many reasons your business’s income could be disrupted, including natural disasters, building repairs and staffing shortages. Protecting your finances from these unfortunate events requires foresight and a thorough business plan.

Beyond simply meeting monthly obligations, it is a good idea to have a safety net which should consist of a cash reserve that allows you to make the necessary business changes during the lean times. The size of the safety net you need is a function of the volatility of your business. In stable businesses, a cash reserve equal to a couple of months of your obligations may be sufficient. In businesses that are more volatile, you may need a safety net that will see you through a drought of six months or more.

Fortunately, building up a financial safety net doesn’t need to be difficult. There are a few simple measures you can put in place to ensure that even if you are forced to temporarily close the doors, your business can recover.

Take out insurance

Comprehensive business insurance can be the most vital protection you put in place when preparing for potential cash flow interruptions. Taking out a policy that covers for income protection and business repairs will ensure you are still able to pay the bills even when the company is not actively operating. You should review your insurance at least every year, to avoid being surprised with rejected claims and lower than expected payouts.

Create recurring revenue

Recurring revenue is essentially the portion of your income that is regular, ongoing and sustainable. Having a significant amount of your cash flow originating from these streams can help you prepare for business interruptions and minimise any damage. Investing in a recurring revenue model can provide benefits to your business and to your customers. In particular, solutions such as direct debit enable you to pause clients’ payments during times when your doors are closed, and easily resume payments once the interruption has concluded.

Boost your business savings

While it can be difficult to save, it is recommended that you have at least one month’s running costs set aside to cover potential revenue gaps. Building this kind of reserve requires plenty of discipline. A few simple ways to boost your business savings include cutting outgoing costs, encouraging customers to pay invoices on time and lowering the repayments on low-interest debts.

With these measures in place, it should be simple to allocate the extra funds toward your safety net.


About our Ausmumpreneur Expert :

Sally-Hams

Sally Hams is the founder of Balance Books, a progressive bookkeeping and small business management based business embracing change in the financial sector to navigate business goals and needs of its clients. Sally is passionate about supporting women in business through financial services.