Most startups tend to overlook the importance of financial management for their growing business.
Well, most budding entrepreneurs tend to think that there is not much that needs to be managed in a small business.
In fact, just like an established business, you need to conduct due diligence when it comes to financial matters for your startup.
Your survival in the market depends on how you use and manage finances.
You want to avoid debts and costs that could bankrupt your business.
We have compiled some tips to help you get it right with your finances as a young startup.
Have a business plan
Proper financial management begins with having a plan.
With no plan, it is impossible to progress and make sound financial strides in your business.
A business plan is a blueprint for the operation and success of your startup.
It helps you to capitalize on the strengths of your business and helps you to look at the different facets of the business that can foster its development.
It is an important financial management tool that can help you know what money you need and where to get the money.
Limit your fixed expenses
Many startups fail to get it right with their financing because of focusing on the wrong things.
When starting a fixed cost like business rent is an expense you should keep at a minimum.
Why pay lots of money for a big office in the heart of the city when you can’t afford it?
Avoid over the top amenities that result in expenses and not revenues.
This is an important step if you care about business longevity.
Track and monitor all costs
There are so many costs incurred when starting a new business.
Think of tracking and cost -monitoring as your ticket to a healthy and thriving business.
You need to track all costs from hiring new people, paying for IT services, marketing your business, or paying for lunch for investors.
Tracking your costs ensures that you manage the cash flow in the business.
You will be able to know what costs are heavy on the business and what can be done to avoid or minimize them.
Before you think of it as a tedious task, think of how easy your work will be when you are handling taxes.
Use proper and efficient technology
Investing in proper technology is essential for your startup.
Given that the business is young, you need to put in the work to ensure you are not losing money because of poor management.
You need a system that manages your cash flow and credit to ensure that you stay organized with your finances.
Seems like a huge expense?
There are some great companies that offer tailored world-class IT services for every user, and they can help inculcate proper tech in your business.
All you need to do is establish your tech needs, find the best package for your startup, and outsource to save costs.
As an entrepreneur, you are aware of the fact that debts are not good.
However, it is also very impossible to stay without debts.
Whether it is customers not paying on time or borrowing a loan to keep up with operations, debts are part of the business.
Although inevitable, debts can be managed.
Ensure that your customers pay in time by having strict credit terms and conditions.
It is also not advisable to take a loan to keep up operations, minimize your costs by cutting down on unnecessary expenditures.
Pay your taxes on time
Part of avoiding debts is paying your taxes on time.
If you have been tracking and monitoring your debts, then this should be very easy.
It means you will not have costs that are not accounted for.
Remember failing to pay taxes on time could lead to additional costs or fines.
Additional costs or fines are not good for your startup.
You will not scale up if you are continually paying for costs that could be avoided.
You must stick to paying what you owe to all stakeholders.
Practice business efficiency
An efficient business is one that can convert input such as capital, labor to outputs such as revenue.
One way to become profitable through financial management is by practicing business efficiency.
It involves engaging your employees, analyzing the processes and systems in place to ensure that it produces the most outcome.
For example, if your employees are spending so much time doing the same task with less progress, you might want to look at the efficient and available IT solutions to change the practice.
Implement changes in behaviors and practices that lead to extra costs for your business.
Again, you can outsource services to help save money and time.
Your main goal as a startup entrepreneur is to ensure that you are making profits from the money you invested in the business.
While it is not a walk in the park, it is also very doable.
It begins with getting it right with your finances.
These tips should get you started on the right path.