We may like to think of business plans and budgets as pillars that can weather any storm, but it’s an undeniable fact that there are simply too many things that can’t be factored into a plan in order to predict the future market.
This is what makes emergency finances so crucial. While similar to surplus budget, emergency finances more or less accomplish the same goal: money on hand that can be immediately used if something unexpected happens.
But what exactly are these unexpected occurrences? Here are five possible events that you should be prepared for:
- Employee travel expenses. This is essential with companies that do a lot of contractual work abroad. Clients may ask for their team to be brought to their location, or have onsite work done that may require you to send your employees outside of the office.
- Natural disasters and calamities. While you may insure your infrastructure and equipment, it’s still advisable to set aside an amount to pay your employees, especially if they happen to be on the clock when said disaster occurs. Separate from hazard pay but equally as essential, a fund set aside for natural disasters and calamities can help your business get back on track sooner.
- Human error. This emergency doesn’t happen often, but it usually ends up being costly when it does. Whether it be through property damage, software malfunction or an error in operations, it’s advisable to have funds set aside in the event it does occur.
- Seasonal changes. This is an often underlooked emergency that companies should be preparing for, especially businesses that live in areas subject to sudden and strong changes in seasons. Sickness, road works and foul weather all come into play during seasonal changes, and your business should be prepared accordingly.
- Just in case. At the end of the day, it’s always best to have a little money set aside for any emergency.
An easy way to start preparing these budgets is to identify which one you’ll most likely need. Running a business that relies on foreign contracts? Employee expenses may be a higher priority. How about something domestic that relies on produce? Seasonal budgets could be the way. For businesses that invest a lot in technology and software, a safety net for human error and hardware malfunction may be the best choice.
Emergency budgets don’t need to be so detailed - simply having a fund to fall back on in is more than enough. Of course, there are other practices that you can look into to make sure that your business is always taken care of such as consulting with other companies, making sure your insurance is up to date and participating in emergency preparedness activities. However, money can do wonders if you set it aside for rainy days - it’ll make sure you are secure until the sun comes out again!
Are you thinking about giving your finances a once-over? Contact myCEO’s team of financial experts today, or learn more about how finance affects your business by downloading our free Financial Pillar eBook here.