Putting Your Business Savings on Autopilot

Put these systems into place to help you stash your cash and help you cut spending.
Partner, Mueller Creative, LLC
April 09, 2012

There are two basic ways for a small business to save money. The first is by simply not spending it: reducing overhead, cutting costs, eliminating all the expenses you can to keep your budget low and your profit margin high. The second is by designating some portion of the money you earn as savings, and leaving it alone so it can grow and be there when you need it.

Both ways of saving money are effective, but they're not going to happen automatically—unless you make it so by setting up the right systems. You don't need a lot of them, either; just a few good ones will do the job, leaving you free to run your business while the money you save accumulates quietly and continuously behind the scenes.

Systems that help you cut spending

Software has come a long way. It's not just for composing business letters, adding columns of numbers or shooting at tiny alien invaders on your monitor. It's fast, it's smart and it can do a lot of the reminding that you used to have to hire a secretary to do.

Goldmine and Office Autopilot are two examples of software that can help streamline your business. Goldmine is a relationship management tool available in several editions to cater to your company's needs, and Office Autopilot is a platform that integrates many aspects of your business (like contact management and payment processing) to alleviate things are often tracked manually. There are several tools available, you simply need to research and test to find what works best for you.

Systems that help you stash your cash

1. Have a bonus program for your employees. Set up a bonus program for your savings account, too. For this example, we can call said account "Fred." When your employees earn their bonus, consider that Fred has earned his too and pay up. This bonus could be any amount, small or large. It could be a percentage of the total bonus you pay out, or of the week's earnings or any other number that's hanging around on your desk. The key is that Fred gets his bonus whenever other employees earn theirs. That way, Fred gets fed on a regular basis. (If your employees aren't hitting their bonus on a regular basis, you've got some other work to do.)

2. Auto-transfers. If income is fairly stable on a month-to-month basis, set up a regular auto-transfer of some amount of money into a savings account. You can designate any amount and schedule it weekly, monthly or quarterly. If monthly income fluctuates enough that you don't feel comfortable designating a set amount and scheduling it before you see the monthly sales, here's another option. Decide on a percentage that you'll save each month, and when you do payroll or bills, pay that percentage to the savings account. (Or, better yet, have your accountant or bookkeeper do this for you so you're not tempted to use the cash before you stash it.)

3. Quarterly taxes and savings. Quarterly taxes aren't a highlight, perhaps, but they're an unavoidable part of doing business. There are a couple of ways to implement savings into your tax routine, so instead of just paying the government you're also paying your business. The first is a simple policy that when you pay your quarterly taxes, you also make a donation to your quarterly savings. Another option, suggested by financial advisor Phil Cioppa, is to "deliberately overestimate [your] quarterly taxes…pay the IRS more than needed and then receive a nice refund in the spring of the following year."

4. Bill yourself. Establish a percentage—2%, 5%, 10%, 20%—whatever you can do, or think you can do, or think you can't do. It doesn't matter. Just decide how much of your profit you want to save before you know how much that profit is going to be. Now estimate, from last year's numbers, how much your annual profit will be this year. Divide that by the number of months left in the year, then send yourself a monthly bill for the amount. Then (this is the important part) pay the bill.

Bonus: At the end of the year, you get to see how close you came to your estimate for annual earnings.