7 Dos and Don’ts of Financial Management for Startups
Building a startup from the ground up is one of the most difficult things for an entrepreneur. The road to a successful startup is rocky and often filled with insurmountable challenges. Establishing a strong financial infrastructure is crucial for startups. Yet, it’s often an afterthought for most rookie entrepreneurs. Despite having a compelling business model, the most common reason why many startups fail is due to the cash crunch and unwise financial management.
If you’re an entrepreneur who has just started out and are entangled in financial complexities, here are some financial management tips that can help you in the journey.
Financial Advice for Entrepreneurs
Don’t: Avoid hiring an accountant
Do: With all the expenses of starting a new business piling up, hiring an accountant may not seem that urgent. After all, you might think that you can keep on top of things.
However, as a busy entrepreneur, bookkeeping and accounting are bound to take a backseat. A regular record of cash inflows and outflows allows you to monitor and manage your money efficiently. Staying on top of your cash flow allows you to monitor your spending and allocate your resources efficiently. It will also enable you to protect your future cash flows, expenses, and revenues. Even if you do not want to hire a full-time accountant, it’s important to have your books prepared and audited regularly by a freelance accountant or an accounting firm.
Don’t: Wait till you start earning money
Do: Financial management must start from the day your company comes into existence. A cash-flow surprise can have a devastating effect on your startup. So, instead of waiting for your startup to become BIG, ensure that you lay the foundation of efficient financial management right from the start to enable your organization to become a data-driven operation that can make better, strategic decisions.
Don’t: Spend more than you make
Do: A solid business plan should include a stable budget. In the beginning, it’s important to keep your expenses low to ensure longevity. Instead of spreading yourself too thin with an elaborate office and other expenses, focus on keeping your fixed expenses within the budget initially. Allocate a majority of the capital to growth and revenue generation.