War chest – Preparing for bad days before they happen

A war chest is a common measure used by contractors and freelancers to protect themselves from rainy days when cash is unexpectedly low as a result of gaps between contracts. Due to the nature of the working style and the volatile pattern of payments, fall back cash is a necessity. A war chest is essentially a piggy bank to cushion you from the blow of unexpected breaks in income, writes, Jon Baird, partner at Scotland Debt Solutions; one of Scotland’s largest debt recovery firms with personal specialities in debt rescue and recovery for Scottish residents. 

Tucked away funds can help meet financial commitments such as household and utility bills, equipment leases, staff wages, child-care and maintaining your standard of living. More importantly, as a self-employed professional in the UK, you won’t usually be entitled to sick pay, holiday pay and maternity or paternity pay, so a war chest can grant financial protection for any sudden changes in your working life. 

Saving for a rainy day 

Saving whilst earning comfortably is an ideal time to start building up your war chest. This can be done efficiently by setting up a standing order as this ensures that you’re consistently topping up on funds. This is a self-manageable way to save and withdraw funds with ease. 

By foreseeing changes and reacting accordingly, this protects the business from bad days before they happen. The UK government have raised a war chest of six billion pounds in the event of a no-deal Brexit to protect against a downturn in trade deals. The term Brexit which has now developed into a synonym for uncertainty is the reason many businesses are turning to stockpile imported goods to meet customer demand in the event of a no-deal Brexit. 

Many UK residents trading overseas may also feel the hit after Brexit day, so it’s important to ensure that you’re financially protected.  In addition to building a war chest, there are steps you can take to ensure that you’re protecting your business from the detrimental effects of interacting with a foul supplier.  Here are some additional measures you can take: 

Credit and background checks 

You should carry out the relevant due diligence to ensure that suppliers are financially responsible and credible by performing a credit check ahead of signing any agreements. This allows you to forensically check if the supplier has a strong history of borrowing and repaying funds responsibly, therefore influencing your decision. By taking precautionary measures to protect your business, you can make an informed decision and prevent any rainy day forecasts. 

Social media sweep 

By carrying out a sweep on social media for feedback from both suppliers and customers, this will give you a first-hand impression of whether the business is a strong performer with a loyal customer base or cloaking a harsher image that you should be aware of. By using a combination of review sites and social media, you can gather an image of the reputation of the business and gauge whether they are financially responsible. 

The power of national registers 

Depending on your country of residence, you may have access to a national register of businesses or corporations, from which you’ll be able to access vital information such as ownership and incorporation details, including evidence of financial performance. 

For example, the Companies House register in the UK is a national database accessible to the wider public, comprising of company information, such as details of company directors, registered office addresses and company accounts. By carrying out a thorough search of the company, you can check if they are in arrears or have failed to submit vital financial data to Companies House on multiple occasions. 

In the US, there is no Companies House register; however, you can carry out a simple search to look for a corporation registered in a selected state. It is a legal requirement to provide information relating to the main officers or directors of the business in the US. This information can be used to research the reputation of the owners and the brand as a whole. 

The motive behind a war chest is to place yourself in the best financial position to protect yourself from any detrimental changes taking place around you. By creating this safety net using a fusion of technological and traditional measures, you can guarantee protection for yourself, your family, business and staff members, ensuring that you’re able to stay afloat through the most difficult of times.