No matter what kind of work your startup does, you’ll always be concerned with one thing – managing money. Tackling your finances in the right way is the key for surviving in the dog-eat-dog world of business. And since you’re running a new company, it’s even more important that you know your way around your startup’s finances. While many people simply rush into entrepreneurship and expect their finances to take care of themselves, you might want to do some preparation while your business is still in its early days. That’s why we’ve compiled a list of 5 tips that are going to help you manage your startup’s finances like a pro.
Start learning about business finance
You may have come up with a great product or service idea, but that doesn’t mean you have everything it takes to run a successful business. Luckily, most of the skills and qualities a business owner needs can be learned if you put if you put enough effort into it. And this is also the case when it comes to managing your startup’s money. First of all, there are so many introductory books on business finance and these are always guaranteed to help you. Even if you believe you know all the basics, make sure you give these little things a go. Moreover, we live in the age of internet and you can find all the info you need on the web. Subscribe to a few business finance blogs and you’ll be guaranteed to learn something new every day.
Separate your personal and business finances
When running your own business, you might be tempted to put a lot of your money into it. You’ll need some business capital for sure, but once your startup has been launched, you should try to separate your personal and business finances as much as possible. First of all, if you put a lot of your money into your business, bookkeeping will become much more difficult. It will take you a lot of time to figure out which deposits and expenses are personal and which are for your startup. On top of that, mixing your personal and business money can make your tax return preparation a living hell. This is the case because your tax return is based on your incomes and expenses, and you’ll have to figure out these while removing any personal deposits out of the equation.
Always try to cut your expenses
When it comes to managing money, you should always try to cut your expenses without having to hamper customer satisfaction. And in order to be able to do this, you’ll first need to understand the difference between fixed and variable expenses. While your fixed expenses are something you have to deal with no matter whether your startup is making money or not, your variable costs don’t depend on how much money your startup is earning. This means there are always some ways to cut your costs in order to save money for your core business operations. For example, instead of paying for a branded software you rarely use, you can give free software a go. This is especially the case with software used for conferencing.
Understand and handle your cash flow
People in the world of business say that cash is king, and they couldn’t be more right. Therefore, if you want to manage your finances the right way, you’ll simply have to know what cash flow is and learn how to handle it. Firstly, it’s very important that you understand that cash flow isn’t the same as paper earnings – it’s a statement about how much money your business receives and how much it spends on operating expenses, taxes etc. Today, there is online software you can use to stay on top of your cash flow wherever you are. Still, in your first two years, you might find yourself struggling to make your startup self-sustainable. Luckily, you can easily maintain a healthy cash flow if you decide to apply for a private capital investment or sell your invoices.
Don’t be afraid to downscale your ideas
Many rookie entrepreneurs believe that the only way their startups can succeed is by dreaming big. This may sound nice but the truth is – it’s all about setting realistic goals and doing your best to accomplish them. One of the biggest reasons why this is the case is the fact that if you dream big, you might find yourself spending all of your money without getting anything in return. And there’s no need to say that this is a recipe for failure, no matter what industry you’re in. On the other hand, if you scale down your ideas and keep the things realistic, you should be able to help your business stay afloat, and that’s exactly what you should be aiming at when you’re just starting out.
Managing your startup’s finances is never going to be easy. In fact, it can be quite nerve-wracking and take up a lot of your time and effort. That’s why you’ll want to keep the above tips in mind and give your business a bright future.
Dan Radak is a marketing professional with eleven years of experience. He is a coauthor on several websites and regular contributor to BizzMark Blog. Currently, he is working with a number of companies in the field of digital marketing, closely collaborating with a couple of e-commerce companies.