While you might not have the savings you wish you did to grow your business, one thing you probably do have in abundance, is money advice. It can be hard to know what to accept and what to ignore.
Here are five common myths about saving money as a small business:
Myth 1: I can’t save until my revenue increases
Put plainly, saving money every month is a non-negotiable. While it’s tempting to wait until your turnover improves before putting money away, this is an excuse that could hold you back forever. Because where one excuse ends, another begins. If you can’t prioritise saving now, you might never.
Start small, and save a small percentage of each invoice as soon as you’re paid. Then, pay your expenses with what’s left. This may require some budget-tweaking, but you should be reviewing your finances often anyway. Rather than dreading it, think of it as an investment in the future of your business.
Once you’ve made a habit of saving, you can increase the percentage. Remember: interest can’t start compounding until there’s money in your account.
Myth 2: I need something to save towards
Sure, it’s important to save money for items that are integral to your business (think shop fittings or a delivery van), but saving for the unknown is just as important.
Setting money aside for this reason means you’ll be covered in instances such as needing to pay out an insurance excess, or paying salaries and suppliers when a corporate is behind on their payment.
Don’t wait for the unexpected to happen before learning this lesson – rather prepare for it from day one.
Myth 3: A traditional savings account is my only option
The biggest benefit of saving with a bank may also be the biggest downfall. While it’s a simple and convenient way to keep an eye on your money and access it quickly, it also increases the chance that you’ll make financially risky and impulsive decisions – for the exact reason that it’s easily accessible. Not only that, but it’s not the best route if you’re hoping to earn interest.
Rather consider options like purchasing shares or putting your money into an investment account. You’ll see higher returns on your long-term savings, and won’t be tempted to spend impulsively.
Myth 4: I can start another day
Despite how hard and unrewarding it can feel putting money aside every month, when the day inevitably comes that you need it for an emergency, you’ll be thankful that you did. You might be tempted to put off saving, but starting today means preventing the wild chase of trying to secure finance, or the crippling pressure of falling into debt, if something goes wrong.
You’ll always find an excuse not to save, and not one of them will ever be good enough. Set a reasonable financial goal, and start working towards it immediately.
Myth 5: The only way to save is by putting cash away
If you’re not putting away as much as you wish you could, don’t feel like there’s nothing else you can do. Reducing the operating costs of your business is a smart way to free up money, which you can then invest.
Here are some things you can try:
- Don’t pay for more office space than you need. Whether you share an office with other small businesses or adopt remote working policies, cutting back on rent is a great way to free up money each month.
- The greener, the better (and cheaper). Consider the implications on your energy bill of everything from paper to lightbulbs. Buy energy-saving appliances and refurbished office furniture. Small things add up in a big way.
- Use the cloud to your advantage. Why spend money on the skills and hardware needed to manage your business processes, when there are affordable cloud solutions that let you do it yourself? Cloud software lets you cut down on human error and operational costs by, for example, ensuring your money is never tied up in extra stock.
- Stay on top of your invoices. Late payment fees are an unnecessary waste of money.
- Freelancers first. Before hiring full-time staff, outsource work such as design or copywriting to freelancers, and take on interns who can assist with admin while they learn.
Money. It’s more complicated than simply knowing how to make it. You need to know how to save it, and how to grow it – and there’s no better time than today to set healthy savings habits.