How to Save Money for a Rainy Day

I HELP A THOUSAND or more stores with QuickBooks. I get to see everything coming in and going out of each company. One thing I’ve learned over the years is that every store should have a “rainy day” bank account.

That means you need at least two bank accounts: an operating account and a savings account.

One operating account works fine to pay your bills; the accounts listing in QuickBooks lets you know where you spend your money. Some stores have three, which is the most I’d suggest (operating account, payroll account, and savings account).

How often should you put money into your savings account? Weekly. Put 10 percent of your deposits into the savings account. If you go to your bank’s website, it’s easy to transfer money from one account to the other.

In my own situation, I started doing this when I launched JewelerProfit 21 years ago. I found that from Thanksgiving through Dec. 31, no jeweler wants to talk to or buy from a consultant (me). In some of the first few years, cash flow in December for me was low, unlike the gush of money jewelry retailers get in December. So, I’d transfer from savings to operating to pay what I needed.

You should save up for a few reasons:

1. For when your business is slow. My custom store was slow in April during tax time.
2. To have money for a great buy. Maybe a large buy off the street is available, and thank goodness you had the money.
3. To make sure you are never late in paying sales tax or payroll taxes.
4. Year-end bonuses.
5. The world! When things are uncertain in the world, it’s great to have money available.

Last year was terrific for almost every jeweler. I don’t think 2022 will mimic 2021, and you should be prepared for “normal years” going forward.

I’d suggest that you save even if you don’t pay your bills on time or are always feeling strapped. Maybe start with 5 percent of weekly deposits.

So how do you fund this account if money seems to be always tight? This goes back to the root problem I’ve been writing about for years: inventory and too much of it.

The first thing you should do is monetize any inventory that’s aged two years or more, whether you heavily discount, scrap it, or return to your vendor for credit. The second way to increase cash is to raise your repair and custom prices. People will pay.

Start today, and let your rainy-day fund grow.