Saving as a Small Businesses: Why It’s Important and How to Get Started

By Matas Pranckevicius

Content Manager, Relay

If you want to get ahead as a small business owner, saving more is one of the most important things you can do. By targeting a 10% savings rate, 6 months of operating expenses in reserve, knowing where to look to save more, setting SMART savings goals, and putting your savings in the right place, you’ll be setting yourself up for long-term success.

In this article, we'll cover the key things you need to know about saving money as a business owner, and how to use Relay to reach your goals faster.

In this article:

Why saving is as important for your business as it is for you personally

Saving is important as a small business owner for many reasons. We understand however that when it comes to small businesses, cash flow is often tight, managing ongoing expenses is stressful and maintaining working capital can mean life or death. 

At Relay, we've built a money management platform that helps business owners stay on top of their finances, so we've seen what can happen when you pursue a savings strategy. By establishing a saving strategy, small business owners achieve things like:

  • Understand exactly how much you have available in the bank at any given time

  • Build a savings cushion in case times get tough due to unforeseen events

  • Have a “war chest” at the ready for new business opportunities

  • Create buffers for recurring operating expenses like payroll, taxes, and supplier costs if cash flow changes

Saving can also help accelerate the growth and expansion of your business. More capital can fund things like new equipment, hiring more staff, or investing in marketing without taking on debt. 

Just like how saving money is critical for you as an individual if you want to live a more comfortable life, buy a house, or invest in professional development, saving as a small business can be a game-changer.

How much should you save as a small business?

Half of U.S. small businesses have enough cash to last about 27 days, with the other half equally divided between businesses that hold less than 13 cash buffer days and those that hold over 62 cash buffer days.

When you compare that with rules of thumb that suggest small businesses should shoot to save at least 10% of their monthly profit and hold about 6 months' worth of operating expenses in reserve, it’s easy to see that most simply aren’t saving enough!

Every business’ cash needs are different and vary significantly based on the size of the business, the industry, inventory needs, staffing models, available short-term liquidity, and other crucial factors.

The nuances of each business’ cash flow profile can play a key role in when and how extra money can be saved — so there is no one-size-fits-all approach. The important part is that as a small business owner, you can effectively monitor your business’s cash flow so you know how much cash you need on hand and how much can potentially be saved.

💡 Want to go deeper? Find out how much cash your business should have on hand >

This is why using a dedicated money management platform can be transformative to your business. For example, Relay’s integrations with leading bookkeeping software like Xero or QuickBooks Online can be a big help when it comes to cash flow management. Considering 63% of small businesses are in the dark on this topic, this is the most important place to start.

As we all know from the pandemic, business conditions can change overnight without warning, so emphasizing building cash savings is no longer just a nice to have- it’s a must-have!

Where to look to save more money

If you're going to start setting aside 1%, 2%, 5%, etc., each month, it has to come from somewhere. So what are the big contenders for generating this extra cash?

Here are some ideas you may want to consider when saving as a business:

1) Cut expenses where you can: One of the most important things to do as a small business owner is to focus on how much you are spending. If you want to save more, unpack your business’ expenses and identify where you can cut costs. This could include reducing staff hours, negotiating better rates with vendors, switching suppliers, or canceling underutilized software. 

2) Improve efficiency: Looking for ways to streamline your operations and make your business more efficient could be a great way to save costs in the short term and supercharge profitability long term. All businesses' operations are different but investing in new technology or equipment, implementing better processes, or finding ways to reduce waste could be ways to uncover savings.

3) Consider alternative financing options: When interest rates go up, funding your business gets more expensive and eats into savings potential. If you have a longstanding relationship with your lender, you may be able to negotiate better rates on outstanding loans or shop around for other options.

4) Diversify your income streams: With more ways to earn money than ever before, you may consider exploring new revenue streams outside of your core business. This could include subletting extra space, starting a podcast or YouTube channel, or passing on costs like transaction processing to customers. 

5) Optimize Taxes: Small businesses can be eligible for various tax deductions and credits. For example, you may be able to claim deductions for your business expenses, such as the cost of supplies, equipment, and utilities.

If you own capital equipment, you may also be able to use the depreciation of those assets to lessen your tax bill. Financing costs may also be able to be written off against your income. While all of these techniques can be strategic ways to find more savings, consult a qualified tax professional to make sure you are taking advantage of all the deductions and credits you are eligible for in the right way. 

6) Take advantage of supplier discounts for faster payments: Suppliers will sometimes offer discounts if they are paid earlier than their standard credit terms. If your cash flow permits, doing this consistently can be a great way to find extra savings.

How to think about saving differently

Up to this point, we’ve been thinking about saving in terms of finding more money to put away after expenses have been paid. 

The benefit of this is that it frees up capital to focus on operating expenses — but it doesn’t let you proactively save. Saving becomes an afterthought or a “nice to have”. 

If you want to be more deliberate about your savings, instead of saving only what’s left over after expenses, start by saving a fixed percentage of your business’ revenue. This approach is commonly referred to as “Profit First” saving or “pay yourself first”. 

By saving through Profit First, you can potentially fast-track reaching savings goals and do so with greater certainty. 

Starting to use Profit First, however, does reduce cash available for operating expenses, so before you go down this route, make sure you have a good idea of your monthly expenses. 

How to create a plan to accomplish your goals

Now that we’ve gone through how much you should ideally be saving as a small business and where to look to generate more savings, you may be wondering how to go about achieving these goals.

Like all things in life, achieving ambitious goals starts with creating a plan and following it with discipline.

One of the most popular and effective methods of accomplishing a big set of goals is through implementing the SMART goals framework. Implementing this framework involves establishing a set of goals that are:

  • Specific

  • Measurable

  • Attainable

  • Relevant to you

  • Time-bound

Setting your goals in this way helps you break down the steps needed to achieve your savings goals in smaller steps and keep yourself accountable.

Once you’ve set your savings goals, map them back to how much you bring in each month, how much you’ll need to set aside to achieve them, and where you might need to shift spending habits.

What should you do with your savings once you have them?

So you understand why saving is important, have identified how to save more, are successfully executing your plan and find yourself with more savings. Congrats! Now what?

Having more cash available is great, but knowing what to do with it and where to keep it so that it keeps working for you can make all the difference.

When a business has extra money in savings, those savings can be kept in several places depending on how much savings there are and how readily available the business needs the funds.

Here are some options to consider when thinking about where to put your new-found savings!


What is it?

What to look for



Business checking account

• Account used for day-to-day transactions like purchases or bill payments.

• Allows you to make deposits and withdrawals for day-to-day transactions.

• Minimum balance requirements

• Interest rates

• Transaction limits

• Physical location of banks and ATMs 

• Online and mobile banking options

• Availability of employee debit cards

• Ensures business finances are separate from personal

• Helps establish business credibility with customers

• Important mechanism for establishing strong financial practices for one’s business

• Enables multiple bank account budgeting

• Lowest interest rate for business accounts

• May include fees and transaction limitations if minimum balances are not met

Business savings accounts

• Dedicated account for storing a cash reserve that’s usually opened alongside a business checking account

• FDIC insurance

• Interest rates

• Fees (ATM, maintenance, minimum balance

• Introduction promotions

• Transaction limits

• Ability to automate savings

•Number of accounts that can be opened

• May have higher interest rates than checking accounts

• Provides dedicated place for savings (separates everyday cash from savings cash)

• Easy to monitor how much one immediately has available in reserves

• Enables multiple bank account budgeting

• May carry transaction limits

• May include fees and transaction limitations if minimum balances are not met

• Requires the management of multiple accounts

Short term investments

• Non-cash short-term investments like certificate of deposits (CDs), commercial paper, or money market products

• Interest rates

• Length of term

• Redemption terms

• Deposit adjustment terms

• Roll over terms

• Generates more interest than savings accounts

• Cash can be secured as collateral to lend against

• Less accessible than liquid cash

• May incur penalties if redeemed before term is complete

• Not easily automatable

When it comes to achieving your savings goals, automating the savings process, and having multiple savings “buckets” is often the most effective way to hit them. We call this, multiple bank account budgeting

How Relay can help

Using Relay’s multiple accounts, you can easily automate the depositing of that 10% of profits to a separate savings accounts via automated transfers.

Once this is set up, it’s easy to track how you’re trending towards your SMART goals and avoid “dipping” in the dedicated savings fund. 

Want to get started with automating your business savings goals? You can apply for a Relay account completely online — the process takes just minutes!