The importance of a small business emergency fund

Key takeaways

• A business emergency fund covering 3-6 months of operating expenses protects your cash flow during unexpected crises.
• Start building your fund through small, automated monthly deposits into a separate savings account.
• Maintain your emergency fund by reviewing it annually, avoiding non-emergency withdrawals and replenishing after use.

No matter how solid your business plan or how detailed your cash flow forecast, running a business means having to deal with the unexpected on an almost daily basis.

While this isn’t always a bad thing, there will be times when an unforeseen expense or an unpaid invoice can derail your operations. That’s why having a business emergency fund is such a vital part of your business.

This article will explain the importance of emergency funds for business and offer some practical steps to help you start building your own fund so you can create your business’ financial safety net.

Why businesses need an emergency fund

A business emergency fund is a cash reserve set aside to cover unexpected expenses or revenue shortfalls. It helps maintain operations during crises, protects cash flow and reduces reliance on debt.

There are any number of reasons why you might need to dip into your emergency fund: an important piece of machinery might break, affecting your ability to serve your customers; a client might become insolvent before they can pay a large invoice; a natural disaster might shutter your business for an extended period; or an economic downturn could cut into your expected sales for the year.

Whatever the reason, having an emergency fund gives you options when facing the challenges that many small businesses are right now. According to research conducted by the Council of Small Business Organisations Australia, 60% of business owners could not pay themselves at least occasionally in 2025, and a quarter needed to dip into their personal savings to continue operating. Put simply, having an emergency fund gives you options when the pressure is on.

Useful ANZ resources:

• How to save $10K for a rainy day
• Saving for a rainy day and spending it wisely

Steps to create a business emergency fund

The best time to start your emergency fund is before you start your business, as the early days can be some of the most unpredictable and complex to navigate. However, it’s never too late to start building your buffer.

The general rule of thumb for a small business emergency fund is to save at least 3-6 months of your regular operating expenses.

So, if your monthly operating expenses were $10,000, your emergency fund should contain at least $30,000.

While this may seem like an intimidating amount, there are a few ways you can start to fill your fund.

• Start small and automate savings: As the old saying goes, every little bit counts. Rather than trying to fill your fund as quickly as you can, set up an automatic monthly deposit that sends an amount you can afford directly to your emergency fund account.
• Review your cash flow regularly: Business conditions are always changing and your cash flow forecast needs to keep up. Regularly checking your assumptions against your actual income and expenses means you’ll have a better idea of how big your emergency fund needs to be and how much you can afford to put into it.
• Create separate accounts for emergency funds: Take the time to open a separate account for your emergency fund. Look for savings accounts with a good interest rate – and preferably without a debit card.

Useful ANZ resources:

• Organise your business finances
• Small business cash flow

Setting up your bank accounts with ANZ

Having separate bank accounts for business transactions, regular savings, tax payments and your emergency fund will help you better understand your financial position and improve your spending habits.

ANZ Business banking has you covered:

• ANZ Business Essentials for your day-to-day transactions.
• ANZ Business Extra for greater transaction control and access to overdraft facilities.
• ANZ Business Online Saver so you can earn interest on savings you’ve set aside for tax time or your emergency fund.

Setting up your new ANZ emergency fund account is simple.

1. Apply online for an ANZ Business Saver account. You’ll need to have two forms of ID handy and the application takes around 10 minutes.
2. Link the savings account to your main ANZ business account for easy transfers.
3. Set up automatic transfers (weekly or monthly).

Maintaining your emergency fund

Once you've built your emergency fund, maintaining it is crucial. Review your fund annually to ensure it still covers 3-6 months of operating expenses. Resist the temptation to dip into these funds for non-emergencies and if you do need to use it make replenishing the fund a priority by resuming your automatic transfers as soon as possible.

Building an emergency fund takes discipline, but it's one of the smartest investments you can make in your business's future. By setting aside funds today, you're giving yourself the breathing room to handle whatever tomorrow brings.