Saving for a rainy day

The more draconian government interventions introduced to control the COVID outbreak have challenged all of us, businesses and individuals, to consider the notion that we can no longer rely on our jobs or businesses to effortlessly produce the income we need.

Many businesses in the hospitality and entertainment sectors had their ability to trade quashed. Lockdown meant closedown, no income. Government did step up and provide furlough grants, to support staff retention, and various other financial funding to keep businesses afloat.

What did we learn?

That COVID had two impacts, on our health and finances, and that we needed to consider the consequences of future events, even those presently unknown.

One way that we can act is to save for these rainy days. We have experience that this disruption can extend to years rather than months. In which case, what thickness of fat do we need to build on our business bones to survive these, however unlikely, restrictions?

The part planning plays

Planning can take several forms but let us consider a basic business plan. These forecasts of profitability and solvency are fixed for the year ahead and are intended to provide a benchmark to judge future results; fine while the world at large is at peace and no external conditions develop to disrupt your plans.

Which is why, post COVID experiences, as soon as external factors change, we should revisit plans and flex them to accommodate these changing factors. This process will reveal where and when your financial challenges are likely to occur – particularly dips in cash flow, profitability and working capital – and give you time to figure out strategies to minimise any damage.

Following this process, it will then be evident how much we need in our rainy-day account to meet any shortfall.

Make hay while you can

It is beyond the context of this post to dwell on these challenges, but while you are able to resume normal business, this does open up the opportunity to transfer a calculated sum into your savings account each month and gradually build reserves.

Now may be a good time to start this process.

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