Startups face unique financial challenges as they try to manage their limited resources and grow quickly. Unfortunately, without proper guidance and planning, it’s easy for startup founders to make mistakes that can potentially threaten the success of their business. To help you navigate these tricky waters, I’ve gathered five important tips for managing your finances early on in the life of a startup.
Separate personal finance from your business
It is important to keep your business money separate from your own money. Track your spending on business supplies, hospitality, and meals with friends. It is especially important if you are the only one in your business. Keeping track of all the money will help you understand how much it costs to run your business and also help ensure that any financial problems with the business do not become problems for yourself.
Keep your costs as low as possible
If you are starting a business, only spend what you need to. If it is something new, try the Lean Startup principles. Make the simplest version of your product or service that shows what it can do. Try it out and see if people want it before spending more money. You can get some services without spending money. Ask your friends and family for help, look for good deals, try to get discounts from suppliers, and look for ways to promote your business that don’t cost much money. It is important in the beginning to learn what works and what doesn’t without spending too much money.
Maintain management accounting
It is important to plan and keep track of your money. Make a list of how much you make and spend. You should separate what you spend on work, money for people who work for you, advertising, and taxes. Do this from the start. It will help you understand a lot about your business and make decisions about how to grow it.
Monitor cash flow regularly
When you start a business, keep track of your money. See how much is coming in and out. Make sure you know how much money is in your account. It will help you manage the cash balance. If there isn’t enough money, ask customers to pay earlier or give discounts if they pay early. Ask clients to pay before work is done and agree with suppliers when payment should be made after finishing the job.
Improve your financial literacy
When you own a business, you have to make decisions about the money. As the business grows, even more decisions will come up. Even if someone helps with this, learning how to talk about money and numbers is important. Start learning early by reading books and watching videos online. You can also go to seminars and ask people with experience managing money for their business.