10 Financial Management Tips For Early-Stage Startups
You’ve come here to see our top 10 Financial Management tips for early-stage startups. Congrats- this marks the beginning of a rewarding journey that you’ve taken the initiative to step out on. Building a business from the ground up can be daunting at first, as I’m sure you’re painfully aware. These tips are guaranteed to make this process a bit easier to digest, and hopefully set you up to springboard gracefully into the next phase of your business adventure.
Important Financial Management Tips Every Startup Needs
Open A Business Bank Account
The first step to making sure your finances are in order is to separate personal and business expenses. This helps you to keep track of expenditures that will become important once tax season rolls in. If not done, finances become tricky quicker than you might think.
Opening a business bank account might seem like an obvious thing to do to some, but it’s not necessarily the first thing that comes to mind to others. This is a sure-fire way to begin intelligently tracking your finances.
Start A Simple Accounting System
You’re also going to want to make it easy to track everything that your business spends money on. You can hire a bookkeeping and accounting service or do it on your own. Companies such as Startup Tandem offer bookkeeping and accounting management, in addition to a variety of other packages. If you do it on your own, setting up an accounting system like quickbooks is the easiest way to do so. Doing this at the beginning will make things much simpler as time goes on.
Having to roll over an existing system into a newer, more efficient one can be a hassle. Especially when you have 400 other things that need your attention. And if this all seems to be too much, it may be worth your effort to hire an accountant.
Understand and Control Cash Flow
The most important thing a business can do is understand where its money is coming from, and where it’s going. Setting up an Accounts Payable system is one way to maximize control of your expenditures on basic payments like bills.
On the flip side, establishing an Accounts Receivable process will help you to understand the money that’s coming in. Consult with a professional to see what systems are right for you.
Build Strong Relationships
Successful businesses are built around strong relationships. There is no successful venture out there that relies on work alone. Taking the time to talk and develop a rapport with clients, suppliers, your accountant, and anyone else involved in the process will only help to strengthen your business.
You would be surprised how far being kind and open will get you in life. Who knows what doors might open? The accountant you befriended might lead you to another person who’s great with money. They could be your future CFO, and you would never have known it otherwise.
Create a Budget
The next step would be to set yourself a realistic amount for spending. Creating a goal that you can work toward for the year will help you stay on track and incentivize smart decisions.
If you check in throughout the year, your initial budget projection will tell you if you are over or under-performing in relation to what you decided. Ironing out problems before they grow will only serve to make life easier.
It can be tough to stick to budget, especially when just beginning. That’s the phase where you have basically no income, and only money to burn. That’s why budgeting is so important. By understanding the amount you have to spend, you can set up an efficient plan that gives you a sense of security in your decisions.
Develop Financial Projections
Using your newly created budget, you can now craft a financial projection for the future. Adding in sales projections, you will be able to see on paper how much money you might be making. That is, if everything goes according to plan.
Like the weather, business can change on a dime so it is important to remember that a projection is not an exact picture of what is to come. However, it can be a valuable tool in understanding the direction you are headed in. With a properly constructed financial projection, you could see your profits rising faster than ever. Companies such as Startup Tandem offer a variety of financial services that can help your business grow. Hiring a company such as Startup Tandem is a great way to get things moving in a positive way for your startup!
Don’t Overspend
We all know the phrase, “You have to spend money to make money”. While this is most certainly true, it does not mean that you have to throw all of your money out the window while hoping that it all comes back someday.
When choosing how much to spend, make sure you are covering the essentials and not much else. Maybe don’t buy the giant office you think you’ll “grow into over time”. Cross that bridge when you come to it, and save some money. On hiring teammates, only fill the positions you know you need. Growth in sales will be your signal to hire more.
Take Care of your Employees
Like I stated earlier, no business goes far without people to push it forward. Making sure that your employees are managed correctly will just take future problems out of the picture. For instance, make sure that payroll is consistent.
Even if you don’t have much cash to throw them in the beginning, a steady stream of something is better than the alternative. And if you have the means, make sure things like stock options are set up so that employees too can share in the growth of wealth.
Learn When to Outsource Work
As the leader of a booming business, you may find it hard to keep up with all of the tasks required of you as time goes on. Time is money, so sometimes spending money to save time might be the best option. Hiring an accountant is one example. This professional money handler will only serve to save you time, and ensure that you can stay on track with everything else you need to take care of.
Maybe, you don’t need to be the one giving all the orders all the time, or putting together the employee schedule. What if you hired a manager to do that work instead? Is that something you realistically need? Taking the time to think this out fully will benefit you over time.
Understand your Taxes
It’s the last thing anyone wants to think about, but it can be a real pain if not managed properly. Knowing how and what to file when it comes to your business is very important.
If there’s ever any doubt about what’s required, heed my advice from the previous tip: Hire a professional. Spending a bit more to save on a potential mistake will earn you more in the long run. Learn about how your financial advisor will help you and what they can do for your startup. Companies such as Startup Tandem are great for early stage startups and work with businesses in many different areas of financial management, accounting, and budgeting.
Conclusion: 10 Financial Tips For Startups
Following these tips, it should be easier than ever to jump start your business. With a healthy handle on the financial side of things, you can spend more time focusing on what you need to grow your business into a healthy venture. Getting started managing your business is no small feat. But with the right knowledge, good people, and these 10 Financial Management Tips For Early-Stage Startups, you should have no trouble at all.