Why Setting a Cash Goal Should be at the Top of Your Annual Business Priorities

One of the most important aspects of running a business successfully is to have a plan in place that ensures you are always financially prepared for any challenges that may arise. That’s why setting a cash goal should be at the top of your annual priorities. As an agency owner, your cash goal should enable you to pay your bills, employees, and taxes while also providing enough funds for your business to grow. Think of it as the amount of cash you need to operate effectively. In this blog post, we will go through some tips on how you can set a cash goal for your agency, manage media, create separate bank accounts for your business, and decide how much money to set aside for saving. If you manage media, it’s advisable to maintain separate bank accounts for your business. Three accounts, to be precise. The first account is for your operational expenses (payroll, taxes, bills). The second is a savings account where you should put most of your profits, and the third is for your client’s media buys. The amount you keep in each account is crucial for cash flow management. For your operational expenses account, you should aim for a minimum balance of one month’s payroll plus 35% of your last three months’ profit. The maximum balance for this account should be two months’ payroll plus 35% of your last three months’ profit. The savings account should have a minimum balance of at least twice your monthly overhead. Your overhead includes your expenses from Cost of Service, SG&A, Other Expenses and Taxes & Interest. Suppose your revenue is project-based, or there’s a significant expense coming up, you would want to increase the minimum balance. If you are not at the minimum balance yet, don’t panic. This is why we have a cash goal at the beginning of the year. Aim to put away some money every month. In due time, and with consistent effort, you’ll get there. Running a business requires sound financial management and planning. A huge part of that planning is setting cash goals that enable you to weather the unexpected and grow your business. Creating separate bank accounts for your businesses, setting up minimum and maximum balances, and tracking your finances are key to achieving your cash goal. This will ensure that you have enough money to pay your bills, have enough money for a rainy day fund and to take advantage of any investment opportunities that come your way.