It’s no surprise that financial stress is a significant source of anxiety for entrepreneurs. Maintaining the financial health of your business can be challenging to navigate, and things can often seem overwhelming. Being prepared before running into financial problems helps to reduce worries so you can focus on the growth of your business. Put the following actionable tips to use in order to ease your financial stress.

Build an Emergency Fund

Income from your business can be unpredictable, especially in periods of economic downturn. One rough month can set you back, and you’ll need cash reserves to keep from sinking. Enter the emergency fund. This is cash in a quick access savings account at your bank. Aim to have 3 to 6 months’ worth of expenses in your emergency fund. This is especially crucial for new businesses that are generating little income in the initial stages.

Don’t Rely on Debt

When you overextend your finances and take on too many liabilities, you strain your cash flow, which causes stress. To remedy this, increase your cash reserves, invest with care, and spend more frugally. This isn’t going to happen overnight, but if you set a goal and monitor your progress, you’ll eventually build up your cash reserves and become more profit-oriented. Also think about cancelling any unprofitable contracts, cutting your overhead, and letting go of any unproductive employees.

Understand Your Burn Rate

Your burn rate is the speed at which your business is spending its budget, and it is a top reason why small businesses struggle or fail. When a business depletes its cash reserves faster than they can replenish them, the result is a lot of stress and possible pressure from investors. You need to understand your burn rate, and you need to be realistic about it. For example, if your company’s reserves amount to $300,000 with a monthly spending amount (the burn rate) of $25,000, it will run out of cash in 12 months. Here’s how to keep your burn rate in check:

• Be conscious of real expenses (don’t just estimate)
• If you estimate your burn rate to be X, bump it up by 20 percent when planning
• Understand how you are spending the money, and the motivation behind it
• Track monthly spending to know if you are within the expectations of your burn rate, and identify issues with spending before they become significant

Organize Your Personal Finances

Organizing your personal finances is just as important as organizing your business finances so you can keep focused on growing your business. Personal investments and a personal emergency savings are crucial components of easing financial stress. Having your personal finances organized will allow you to continue to lead your business even when unexpected costs crop up.