Finance Coach - Vol. 33

Finance tip: Utilities

Insulate your roof. One of the simplest ways to save on your electricity and energy costs is to have your roof/ceiling insulated. Going into summer here in the Southern Hemisphere, it will help in keeping your house/office cool, and reduce your reliance on energy-chowing air conditioners. For our Northern Hemisphere readers, going into a cold winter, it will help to keep the warmth in your building and stop it from escaping out through the roof. This then has the benefit of reducing the need for heaters and thermostats to be left on non-stop. While you can obviously contact the experts to come in and do it for you, there are also cost-effective ways to do it yourself. Speak to your local handyman or hardware store about the best materials and layout for the job…

Business tip: Finances

Create a ‘slush fund’. This is one of the most prudent financial habits that a business can get into, yet so few actually follow the principle. Essentially, what it revolves around is taking a little bit off the top each and every month (this might be based on revenue, profit, or whatever), and putting it into a separate savings account. This slush fund then serves two purposes: The first of these is to provide an extra source of income, from the interest generated off of the capital in the account. This may only be a few extra bucks a month, but it may be enough to cover something small like your phone line rental or coffee/tea expenses (remember, every bit helps). The second purpose is to build up a buffer against bad times or unexpected expenses. From personal experience, I have done this with my limousine company. Every month, once I have run the income statement and calculated profit, I only pay out 90% of the profit. The extra 10% then forms part of the company’s slush fund. Over the years, following this principle strictly has produced the following result: If I were to turn off my phones today, and stop running the business in its entirety, I would still be able to pay salaries and overheads for a full six months. That’s right, six whole months! How long would you last?