Although it is something that has been made more accessible due to the growth of the digital world, starting up your own business is still difficult and there is a lot at stake for those who take the plunge and go for it. Start-up finances, securing investments, and building up viable brand are all things that stand in the way of modern entrepreneurs.
Whilst it may be difficult, however, it is not impossible with the right knowledge and work ethic.
One area where many start-ups fail is finances. Financial problems are, by far, the biggest ‘killer’ of start-up businesses and any budding entrepreneur needs to make sure their start-up finances are in check at all times.
5 Great Tips for Start-Up Finances and Financial Management
With this in mind, here are five solid tips that all start-up entrepreneurs should be aware of and take inspiration from.
1. Managing cash flow is very important
Most start-up entrepreneurs won’t have heard of the term “cash flow” before going into business, however, proper management of it is crucial. One of the biggest causes of failure for start-ups is running out of money and it is bad cash flow management that can lead to this scenario.
You, as a business owner, need to know where every single penny is coming from and going to. If you do not keep on top of your cash flow, your start-up will be put in a very precarious situation and you may not last very long.
2. Monitor all your spending
Unfortunately, your start-up’s bank account isn’t an endless source of cash. As a start-up, you are also going to have expenses flying at you from every which way.
Because of this, you need to keep an eye on where your money is going. This is part of good cash flow management, however, monitoring of spending warrants a category of its own; there are plenty of software solutions and applications available that make tracking your company’s spending very easy and we recommend making use of one for better start-up finances.
3. Limit your expenses
We understand that starting a business is exciting and that you may be inclined to go and purchase top-of-the-line equipment and splash your cash in your first month, but you should avoid doing this.
As a new start-up, you do not need a hugely expensive and flashy office in the center of a major city—this should be a goal you build your business towards, not something you invest in straight away. Be wise with your start-up’s cash and only spend the minimal amount needed to trundle along through your first year or two.
4. Prepare for the worst
Although you should be optimistic about your business, you should also be prepared for things to go bad—chances are that you’ll experience some rough periods and being ready for them is the key to not only surviving through them, but thriving afterward.
Keep financial reserves in an emergency account that you can use to keep your ship sailing through the roughest of storms. The economy can change in a moment’s notice, supply chain disasters happen, and logistics can break down—having emergency cash on hand to weather these storms is the difference between success and failure.
5. Time is money
Understand that every second of your day has a monetary value, and this monetary value adds up. You only get a finite amount of time each day and so you should take this into account when you are planning your schedule.
Every second you spend doing something that isn’t related to or benefitting your business is time and money that is wasted. This won’t help your long-term growth.
Start-Up Finances Don’t Need to Be Feared
If you understand the basic financial principles that overshadow your start-up and are aware of the above tips (and more—there are plenty of resources out there!) you should find that your start-up is in a much better long-term position.
Don’t let your new start-up business succumb to the financial pressures that have ‘killed off’ so many that have come before you. All it takes is one disaster and your start-up could be gone in a flash.