Roy's Blog

August 23, 2018

How should startup entrepreneurs manage their business finances? — guest post

Cash flow rules

A highly effective CEO concentrates on creating a convincing product, employing the services of a proficient team, boosting sales, and making his clients satisfied and happy.
However, many leaders are engrossed in managing so many other issues, they do not pay attention to the most critical aspect of their startup; making sure that the organization is constantly raising funds at higher valuations.

The startup entrepreneur must:
— Know when cash is going to run out
— Understand the precise milestones and objectives to be attained in ways to receive an ever-increasing valuation
Create the most effective plan for fulfilling those milestones in a suitable timeframe

Cash flow

Here are some important ways to effectively manage your business finances if you are a startup owner.

Manage cash flow carefully

Most startups actually do not succeed because of a host of reasons but the most common cause of a startup failure is running out of funds. You need to be very meticulous about all your calculations and know exactly how much money is coming in and where every dollar is being spent.
If you do not keep track of your transactions and cash flow, your business will be in jeopardy. Nobody will care about how fantastic your idea if you have no funds to feed it. It is vital to chalk out the right budget and firmly stick to it.

Constantly monitor all expenses

Once you start operating your business you will be tempted to incur more expenses than you need. It may be impractical for you to hire a full-time accounting professional right at the beginning.

So consider using a competent accounting software package to remain on top of your expenses and stay organized.
This will help “smooth” cash flows over the year in order to accommodate annual expense obligations such as taxes. However, as your operations expand, consider employing the services of a qualified and experienced accounting professional.

Be transparent & honest with lenders & investors

Nothing could be more hazardous to your business than dishonesty and sheer lack of communication.
Startups must necessarily be open and truthful while raising money or taking out loans. If you behave in a secretive and shady manner, nobody will trust you.
Similarly, if you are reluctant about revealing the important numbers such as demand forecasts, you could easily lose the opportunity and trust of capital sources.
Often at the beginning of your business venture, you rely on your friends and family for fundraising. In that case, to establish credibility you must be open to them regarding the organization’s financial condition. If you are relying on investors, you must be as precise as you can about the assumptions behind your forecasts on sales, operating and capital expenses.

Restrict your fixed expenses in the initial stages

At the start of your venture, keep your expenses to a minimum — you don’t need a plush office or catered meals. You must consider operating thin so that you can divert more funds toward the growth of your business.
Many startups fail due to spending lavishly on state-of-the-art amenities; they forget that their top priority is generating more and more revenue. Once your revenues start growing, you can consider incurring more overhead expenses. Until then, you need to be patient and wise.

Be prepared for failures but stay optimistic

When you start a new business you must be prepared to face the possible outcome that your personal finances could be jeopardized. If you have current employment, stay with it until your startup is in a position to effectively replace that income.
Create and keep reserves in some emergency savings account as a preparation for financial crisis situations.
Make the best use of micro-investing opportunities and consider allocating funds to a reliable online platform every month.

New customers

Concentrate on getting new customers

Customer acquisition must be your top priority. Remember your business would be a flop-show without customers. Once you are able to take on various acquisition channels, consider optimization the mix to lower your overall costs.
At the outset of your journey, it is obviously not possible for you to examine the pros and cons and reliability of all possible acquisition channels. Your resources are limited so focus on those channel opportunities with the greatest financial potential.

Establish financial objectives

Instead of being mesmerized about building a huge company, set realistic and specific measurable financial goals and objectives. You can set weekly, monthly and even daily revenue objectives and be sure to keep track of your results.
And be prepared to tweak your goals to achieve constant growth. It is essential to constantly keep attaining little goals to keep your morale high and enable you to move forward and achieve the major goals necessary for your success.

Remember: time is money

If you are working hard to achieve all the financial goals of your startup, these financial tips will definitely help.

And remember, time is as precious as money so don’t squander it by, for example, attending pointless meetings that have no relevance to your business.
Time is the most precious asset that startup entrepreneurs have so use it wisely by focusing only on activities that are directly linked to your new business idea.

Marina Thomas is a marketing and communication expert. She also serves as content developer with many years of experience. She helps clients to develop their long term wealth plans. She covers an extensive range of topics in her posts, including business debt consolidation and start-ups.

  • Posted 8.23.18 at 04:38 am by Roy Osing
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