Every small business should have access to an emergency fund – four to six months of reserves that will keep the business doors open, put food on the table and a roof over your head. This might sound like a mountain of money, but not having these funds could result in the failure of a business.

An emergency fund doesn’t necessarily mean cash in the bank. Although you should have liquid assets to last you several months, the rest of your reserves might be a credit line, retirement account or some other place you can lay your hands on cash if necessary.

Think of your reserve account as any other bill you get every month. It has to be paid even if you must sacrifice something else until you can get the fund established. Once it’s there, you can feel a little easier about making it through a cash crunch or business slow down.

Q. I provide computer services and use a billing service to handle my invoicing. At the end of the year I receive a 1099 from the service. This service has suddenly asked me to provide a certificate of insurance. I get all of my own clients, so I don’t understand why the service needs this information. Am I required to give them any kind of insurance certificate? 

A. It sounds like the service is the employer of record. If they are the service provider of record, that might explain the request for an insurance certificate. It’s becoming common for companies that retain independent contractors to require insurance to protect themselves. Most often they want general liability. However, some may require errors and omissions (E&O) insurance if you’re providing major computer programming.

General liability insurance would cover you in case there was property damage or injury – for example, if you inadvertently trashed a computer or spilled coffee on the floor and someone slipped and was injured. E&O insurance is similar to a doctor’s malpractice insurance. It would protect you if something you wrote in a program caused financial damages to your client. It’s also possible that the company wants to see proof of workers’ compensation insurance.

Find out exactly what kind of insurance the service company is requesting. You may already have the necessary insurance. Or you might need to contact an insurance agent and do some insurance shopping.

Q. I need a new computer. What are the advantages and disadvantages of leasing versus buying?

A. It’s difficult to be specific, since there are numerous variables to everyone’s personal situation. However, there are some general issues that fit the majority of situations.

Whenever you make a purchase the real issue you have to calculate is how much will it cost you to own an item when your last payment is made. If the lease payments are $88.50 a month for 36 months, your real cost is $3,186. If you charge the computer on your credit card and pay it off in 24 months at $124.50 per month, your end cost is $2,988. It’s almost always more advantageous to buy equipment rather than lease it. The total outlay for leasing is generally more than if you finance the purchase yourself.

If you lease equipment, you can only take a business expense deduction for the monthly lease payment. So, if you lease the computer for three years you take the deductions over three years. However, if you purchase the computer (even if it is on a credit card paid off over a period of months) you can take the entire cost all in the year you put the computer in service. This is done with the Section 179 deduction for depreciable property.