How to Help Clients Build Rainy-Day Funds

Gina Deveney
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Accountants are often called upon to help managers and business owners make smart financial decisions, and the preparation of a rainy day fund is an essential step towards ensuring the longevity of a company. An emergency supply of liquid assets can help companies keep ahead of bill collectors if a downturn in the economy or local markets occurs. Private citizens, government entities, and businesses alike rely on their rainy day fund in times of trouble.

Establishing a new emergency fund requires paying close attention to current income streams. Accounting professionals need to work with clients to examine all sources of income as well as expenses. Reports detailing accounts receivable and payable can help you easily determine whether or not your clients can immediately begin establishing a rainy day fund. If ledgers or personal income and expense statements show that the funds are not currently there, then these reports may also enable you to find areas where income may be increased or costs lowered to help balance the books and create a surplus. This period of examination is essential for creating a sound rainy day fund.

Debt and unavoidable expenses, such as retirement funds or medical coverage, should be accounted for as you begin to map out how your clients can save to create an emergency fund. Paying down debts can help ensure that your clients do not find themselves caught in an endless loop where the interest on monies owed begins to outweigh any interest or growth in the rainy day fund account. Accounting for all debts, regular payments owed, and other ongoing expenses allows your clients the opportunity to pay down or eliminate debts and remove them as a potential threat to their savings.

Once you and your clients have accounted for all income streams and debts, you may begin the process of setting aside funds on a regular basis. Many states automatically set aside a specific amount from each income source or tax period to help maintain their emergency assets, and this is also good practice for individuals and businesses. You should work with your clients to find a percentage or set sum that can help them begin to create an emergency savings plan. It also falls on you at this point to advise them whether a traditional savings fund or a financial option that pays greater interest is more suited to their needs.

Remember that careful evaluation of and regular payments to the fund are the keys to success. Work with your clients to determine how and when adjustments will be made to the operation of the fund, such as when to increase or lower payment levels as well as what constitutes an emergency that allows them to dip into the rainy day fund. Armed with this information, your clients, whether private individuals or businesses, can make the right decisions and you can more easily assist them with preparing for the unexpected.



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