How can investments save you from a disaster?
If you are so lucky to have money in cash in your hands, you can afford to take advantage of making good investments in your business. And you should benefit from this enviable position as much as you can.
The wise thought is that your business must have liquid assets that are equal to four to six months of operating spending. It is really a good rule, but I want to offer you to make your accounts separate.
It means that you need to have one regular account the balance of which must cover the month with the lowest income.
And the other account where you will make savings for an emergency. The sum on this account should equal four to six months of operating cash.
Here you have some tips that will help you to calculate both:
You should make an analysis of the last 12 months of spending, divided into production spending (also known as the cost of the item sold in manufacturing or distribution businesses or cost of sales in service businesses), and overhead expenses that you spend every month, despite sales volume.
You must take your current assets (that account bank balance, inventory value, and outstanding accounts receivable) and subtract your annual passive voice (taxes you have, short-term loans you cover, and accounts you pay), then it must be divided by 365 to understand your daily operating amount. To count the emergency fund you should multiply this by the number of days.
If you still cannot understand what amount of money satisfy you, you should count all possible future spending: some unexpected treatment, the worst event that can happen, and the most spending you might have.
To play the worst scenario you should imagine that you have lost the best client, your manager has found another job, or you just have been caught in the fire.
Of course in such a dramatic situation, you may always use Finexro for trading forex and cryptocurrencies online that can help you to solve these unpredictable monetary problems.
But it will be beneficial if you count the necessary amount to have on your emergency account. Of course, you must have enough income to make such savings. To have this money work you may also invest it in some short-term fund.
In the end, I want to make a recommendation for the situation if you really have some extra money. For example, you have covered all your spending and calculated all necessary amounts on your emergency account.
In such a case the best action you can make is to use this money for developing your business. You can always improve your service, buy better equipment, and hire some professionals. Do not just sit on your money, it must work. And do not lose the opportunity when your business is increasing to make it even more beneficial.
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