A small business owner in Raleigh, North Carolina told me that one of his business goals was to have $20,000 in savings before the end of 2011. Based on our accounting records and the cash flow of his business, this is reasonable.
What’s been difficult is having the discipline to actually put money aside. The bills in his company’s accounts payable, the loan payments, and the payroll every other week seem to always eat up available cash flow.
I resolved this with a very simple tactic that I’ve used for many other small business bookkeeping clients. For every deposit that goes to the bank, we siphon off a small percentage (1-5%) and put it into savings. The percentage we choose is a function of how much they can reasonably save, without it being a detriment to the business, divided by the cash-basis sales for the year. The other key is to turn off the option that allows the business savings account to act as overdraft protection for the checking account. Preventing overdrafts requires another kind of discipline.
Try this idea, it really works! In fact, if you have other ideas for how to save money, please put them in the comments section.