Building a cash reserve

Building a cash reserve

Insight from The Kenza Pod

Every business needs a cash reserve. Not just because it sounds financially responsible, but because life is full of “Oops, didn’t see that coming” moments. 

You don’t want to end up scrambling for funds when the next crisis hits, like your main supplier going rogue or your trusty laptop suddenly deciding it’s nap time—for good. 

Let’s get into a solid, but not-too-serious, strategy to set up a cash reserve that’s ready to bail you out, whatever the surprise.

Step 1: Set a Monthly Target and Hit Autopilot

It’s recommended to have at least 3-6 months worth of your operating expenses as a cash reserve.

Trying to save that pile of money all at once? Not fun. Instead, break it down into monthly chunks and let automation do the work. This way, saving feels like less of a chore and more like a routine.

Look at your monthly revenue and decide on a percentage you can live with. Most businesses aim for 5-10%. If that sounds ambitious, start smaller and work your way up.

Next, set up a recurring transfer from your main account to a dedicated reserve fund each month. The key here is consistency, not huge amounts—let automation be your savings buddy so you don’t have to think about it every month.

Example: Say you bring in $20,000 a month and decide to sock away 5%. That’s a simple $1,000 each month, which adds up fast without making you feel like you’re giving up all your profits.

Step 2: Add it to the Budget (No, Really, Make it Non-Negotiable)

The best way to actually stick to this plan? Treat your cash reserve like a fixed monthly expense. Yup, just like payroll or that monthly coffee subscription nobody remembers signing up for. By making it a priority in your budget, it becomes a habit—and habits are harder to skip.

Step 3: Layer Your Reserve in Tiers

This is where things get interesting (and slightly fancy). Instead of dumping everything into one account, create a layered reserve based on how quickly you might need access to it. 

A tiered system gives you flexibility—and maybe a bit of interest income—while keeping emergency funds accessible.

1. Tier 1: Cold Hard Cash – Keep one or two months of expenses in an easy-to-access savings account.

2. Tier 2: High-yield Savings or Money Market Fund – Another two to three months here, where it’s earning a bit of interest but still easy to grab if you need it.

3. Tier 3: Short-term CDs or Treasury Bills – This is where you can put funds you’re not planning to touch soon. Still accessible, but with a bit more growth potential.

Having this setup is like bringing both a raincoat and an umbrella—you’re prepared no matter the situation.

Step 4: Annual Check-In (A Little Business Health Assessment)

Businesses evolve, so your reserve should, too. Once a year, give your cash reserve a check-up. Look at your expenses, future plans, and any major business changes to see if you need to tweak your reserve goals.

If you’re anticipating a big expansion or a new hire spree, bulk up that reserve ahead of time. Think of it as prepping for the future, not just reacting to the present.

This keeps your reserve plan nimble and makes sure it’s up to date with the realities of your business.

With a bit of planning, discipline, and the right strategies, building a business cash reserve can be one of the best moves for your peace of mind and your business’s future.