# Savings calculator

A savings calculator is a tool that allows you to estimate how much money your business can save over a certain period of time by making specific changes or improvements.

Page written by Ian Hawkins. Last reviewed on July 11, 2024. Next review due April 1, 2025.

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## How to calculate business savings potential

1. Identify the current costs: Start by listing the expenses you want to analyse. This could include things like operational costs, overhead expenses, energy bills, or any other area where you’re considering potential savings.

2. Determine the potential savings: For each expense category, determine how much you could potentially save by implementing changes. This could be through cost-cutting measures, process optimisation, or other strategies. This will involve some research or estimation.

3. Calculate total potential savings: Add up the potential savings from all the expense categories to find the total potential savings.

4. Specify the time period: Decide on the time period over which you want to calculate the savings. It could be a month, a quarter, a year, etc.

5. Calculate annualised savings: If your time period is shorter than a year, you’ll need to annualise the savings. For example, if you’re calculating savings for a quarter, multiply the total potential savings by 4 to get an annual estimate.

## How to calculate interest on a savings account?

Calculating interest on a savings account involves understanding whether the interest is simple or compounded. Most business savings accounts use compound interest, which is calculated periodically and added to the principal.

Simple interest formula: Interest=P×r×t

Where:

• P is the principal amount (initial savings).
• r is the annual interest rate (decimal).
• t is the time the money is invested (in years).

## How much should I save each month?

The amount you should save each month depends on your business’s revenue, expenses, and financial goals. A good starting point is to aim for a percentage of your revenue. Many financial experts recommend saving at least 10-20% of your monthly revenue. However, this can vary based on your business needs and objectives.

## How frequently should I contribute to my savings account?

Consistency is key when it comes to building your savings. Here are some tips:

• Monthly contributions: Align with your revenue cycles and contribute a set amount each month.
• Automate savings: Set up automatic transfers to your savings account to ensure regular contributions.

By saving regularly and strategically, your business can build a solid financial foundation to support long-term success and stability.