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Emergency Fund Setting Up - Tips

Every business has to go though times of uncertainty and financial crisis. Setting-up an emergency fund is thus vital for survival of most businesses, and even for businessmen. Here are some tips for setting-up an emergency fund.

• Determine the minimum emergency fund the business need. For most companies the optimum emergency fund is the sum of 5 or 6 months working capital.
• But the emergency fund size depends on many other factors like industry, company type, number of employees, money flow, etc. If a company’s daily/weekly money expense nearly equals the income, then they can have small sized fund.
• Find cash for setting up the emergency fund from other than your working capital; like from profits, commissions, cost-savings, replacing/avoiding of high-cost systems, etc.
• Keep your emergency fund separate from working capital.
• Keep your emergency fund always accessible. That is not investing them for long-term profits or money market accounts. Short-term profits are ok, but make sure that you can get money whenever you need.
• Never plan anything which needs spending of your emergency fund.
• Grow your emergency fund every year. It is also good to maintain an upper maximum limit, so that it never grows too much.

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