Can a bank account help you sleep?

Entrepreneurs dream of going into business because of the lifestyle it can afford them. But many often get trapped in the negative side of entrepreneurship without breaking through to the positive aspects. This is backed up by the alarming stat that approximately 50% of businesses don't make it past their fifth trading birthday.

Have you ever spent the night worrying about how to pay all the bills that keep piling up? Have you ever avoided returning phone calls from creditors because you don't have the money and are not sure when its coming in? Even if you haven't been in this situation, I've discovered a secret that one of the most successful business owners in the world has used to eliminate the worry.

While I believe there is no single magic wand solution to business cashflow issues, one great way to minimise stress could be to start up a "sleep well at night" bank account.

It's a concept that is certainly good enough for Warren Buffet. The world-leading business owner is a strong advocate of such a business account. He maintains his own "sleep well at night" bank account of approximately $20 billion dollars (this is what helped him sieze opportunities during the GFC, when most other companies had huge debt reserves instead of cash reserves). Okay, so this numbers a bit out of reach for the struggling small business owner. But to put this in some perspective, $20 billion is equivalent to two months revenue for Warren Buffet.

And I think two months revenue is a realistic goal for business owners to set aside in their "sleep well at night" bank account. Like anything, short-term targets can make it work. Over the next 6 months, you could aim to put one months revenue set aside. If that seems like a bridge too far, aim for two weeks revenue. A key way to do this could be to immediately transfer out a small percent of revenue each time it comes in. A business budget is also a must have to ensure the success of implementing a "sleep well at night" bank account.

One strategy that I've used for a client in the past involved setting up a high interest, no bank fee account with a separate smaller bank (smaller banks and credit unions can often give you better interest, but shop around) that wasn't automatically linked with their normal trading account. This made the money in that account that little bit harder to get back into the "black-hole" of the business cheque account. So its similar to a term deposit, but with funds that you can access if you need too.

This "sleep well at night" account strategy is great for a small business with relatively low debt levels. If you have high debt levels, than you may need to adopt a different strategy focusing more on debt reduction to sleep well at night. If you don't have any spare cash to think about a "sleep well at night" account, than you may need a complete business overhaul to get back to achieving the reasons why you wanted to go into business. I intend to touch on some of these issues in future blogs.