How to build a cash reserve when money is tight.

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Having large cash reserves provides many benefits to any business. It can help your business stay afloat during an economic downturn, gives your business the cash it needs to adapt to changing markets, and simply provides peace of mind to business owners. These cash reserves are often called war chests, as they are finances built to be taken advantage of during times of conflict, strife, or emergencies.

But a common question business owners have is, how do you build these cash reserves while money is tight? This can be difficult to do; however, it is not impossible. Here are 4 ways you can build up your war chest while tight on cash.

Shift any extra money into your cash reserve

Through COVID-19 some of your expenses may have changed. With all the Government support out there, any money that you have left over should go into your war chest. Not only that, but normal events your business may have held, business travel normally done, or hiring, may have all been effected by the pandemic, so the money you save should also go into your war chest.

In normal circumstances, if a event, or other business engagement is cancelled, and you do not need to pay off outstanding debts you should consider putting that money into your war chest.  

Preserve cash where possible

Now is a good time to look through your expenses and see what can be reduced. You may be able to find ways to cut costs so additional money can be put away into your cash reserves. It can be difficult at times to analyse your expenses to find areas you can reduce. Consider services you pay for that you don’t need, or software subscriptions you don’t use. Even downgrading to a smaller plan can help if you use this software occasionally.

Any money saved here should go into building your war chest, allowing it to grow over time.

Begin taking advantage of assistance programs

There are many Government assistance programs out there to assist your business during times of crisis. Pay attention to loan repayment terms and don’t sign up to anything your business won’t ultimately be able to pay back. But, if there are these programs it is a good idea to apply for those you are eligible for.

It also isn’t just the government offering assistance. Many financial institutions, corporations, and loan providers are looking for ways they can support small businesses. Do some research and see what options are available for your business.

Ultimately, this money can cover your expenses, and any left-over money can be used to build your war chest.

Find alternative arrangements with suppliers

You may be able to negotiate payments to your suppliers. Talk to your suppliers and find out if there are ways you can extend payment deadlines without damaging your overall relationship with them. There may be an arrangement which saves you money without costing them a lot. Even slightly extended payment terms will help your cashflow, stopping you from dipping into your cash reserves.


While it is important to build your war chest, it is also important to find ways to avoid using it. This will help you save money for days when its use is unavoidable. Building a war chest is a necessary part of ensuring your business can survive through a crisis. If you need help building your cash reserves talk to one of our friendly bookkeepers.

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