Building up Cash Reserves when nothing else works

Have you ever had a great profitable year that when you reflected upon it, realized that
even though on paper it looks great, you still felt you had nothing left. I’ve found that year after
year of building a business, no matter how profitable I am that it really doesn’t mean anything
until I look at my how much is in my savings account. It’s not easy to put money away.
Sometimes I’ve thought to myself that after I get paid for this big project I will put some
of the leftover money away or take a chunk of my profit once my bills are paid at the end of
each month or quarter. No matter what I tried to do, it never worked out, the money would be
used on an expensive repair or a big unexpected bill. I just felt like I could never get ahead.
It wasn’t till I made a commitment regardless of what my current situation was financially
that I needed to commit to saving every day. Saving every day in little chunks will eventually
lead to bigger numbers. No excuses on where else you could use the money, you have to save.
In 2008 I had a nice healthy savings account built up over the last couple years. I was 32
years old making money but didn’t have the discipline to hold on to it and use it wisely. I used
up the money on a pool for my house and some real estate purchases. I thought that I could
spend the money and in no time we would fill it right back up. I was wrong.
The economy changed my industry forever in September of 2008 and my revenue
continued to decline each month. I sold everything I had a loan on, I laid people off, I continued
downsizing until 2010. Would it have been easier if I still had money in savings to help with the
cash flow burdens forced upon me? Maybe, I learned a lot in those years and wouldn’t change it
for anything else but at the same time I don’t ever want to go back and do it again.
You also need to look at having a surplus of cash if you have any type of threat that
could affect your future like tax issues, a lawsuit, or an opportunity to purchase equipment at a
moments notice that may prevent you from you having time to get a loan. Having cash can be a
powerful tool. I’ve had more opportunities to purchase special equipment at a moments notice
for a great price by having cash available. You should know when they say “cash is king” that if
your business was to close tomorrow, that’s all that you have left over to take with you.
Here is how I build up my savings. I’ve shared this with other business owners and they
have built up a great chunk of money in savings following this method when nothing else works.
It’s simple, you just need to do it. Here is how, commit to a certain percentage of each deposit
that you will put that amount into savings each and every time. Have a big number in mind that
you will not touch the money until you’ve reached that milestone.
I started this when I was behind in my account payable’s. At first I felt guilty about putting
money into savings when I could be paying another bill that was already beyond 30 or 60 days.
But at the same time if I didn’t have a reserve account if something bad happened to my
business that wouldn’t allow me to recover then I wouldn’t be able to pay anybody anything.
Having this reserve account allowed me to save money slowly and when I reached a certain
amount, I would take a chunk of it and pay off a credit card, cut the card up and close the
account. This helped me slowly reduce my lines and loans that I had accumulated during the
good years. Eventually you will pay all your debt off and be able to manage the payables a lot
quicker when your cash flow is moving quicker because your debt load is lower.
Eventually when your debt is paid off, and your reserves are high enough, then you can
start transferring money into retirement accounts that will help protect your future. This is the
key to look back at a tough year and realize that you have something left over and it was worth
As you become more profitable then you can increase the percentage of each deposit
into savings. I started off with 3%, you don’t miss it and it doesn’t hurt your business to put that
away. Eventually I put 5% transferred into savings, and today I’m putting 10% away on each
deposit daily. The best way we did it was to make the daily deposit, then write a check for that
percentage to your savings. It automatically is taken out of your checking account and is gone.
This is an easier method than to transfer it online because you can also track your bookkeeper
doing as you’ve asked.
You can practice this at home also. Eventually each little deposit adds up and you will
feel great about your accomplishment. Those with cash have more opportunities than those that
buy everything through a loan, lease or credit. Try it, you won’t regret this easy way to build up
your reserves that protect you and give you the freedom of why you own your business.
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