When we think about beginning our startup, managing our finances is that necessary step that we always want to omit. Nevertheless, since it is necessary to give our dreams the wings to fly, we cannot miss out on managing them. Managing finances is more than bookkeeping and balancing the statements, quite contrary to the popular belief among entrepreneurs. Entrepreneurs need to have proper money management tips to scale their businesses to the next level and to have enough support for rainy days. Well managed finance is the primary difference between businesses that climb continuously and businesses that succumb to the first hurdle. So here we are, to share with you some essential insights on managing finances.
1. Say No to Procrastinating Finances
Given the choice, we will let the finances fall behind and given the million other things on the to-do list. But the reality check is it’s not a choice. Breaking down the business expenses into categories like paying employees, sending invoices, investments, miscellaneous, etc. makes expenses more manageable. Regular bookkeeping is essentially important to keep the viability of your business on track. Moreover, putting off the accounting work will not only increase the burden of doing it but may lead to financial blunders that could be avoided otherwise. If accounting, bookkeeping, and managing finances are not your forte, hire a professional to provide you with accounting services. It will sort your finances rather than have you procrastinating about it and let you concentrate on the business operations.
2. Analyze the Cash Flow
Needless to say that every business has seasonal spikes and times when the revenue comes in slower during a particular financial year. Research speaks that almost 82% of startups fail due to poor cash-flow management. You must understand the sales cycle and the revenue conversion of your business, to build a cushion for keeping it afloat during times of slow growth.
3. Identify your Core Strengths and Work on them
When you begin a business, you are full of motivation and you want to do everything right, fix every shortcoming. It’s undoubtedly a positive approach but not a feasible one, considering the scarcity of resources at hand. So it’s essential that you identify your strengths, and optimize them to stabilize your business first, and then work on improving your limitations. Keeping your core strength as the foundation to make business decisions and allocate resources and revenue accordingly will make your business sustainable. Also, identify the resources, employees, and services that contribute to the growth of your business and maintain deep ties with them rather than continue to look for the next new thing.
4. Prioritize your Work but Live beyond it Well
Your work should not be the only thing that you are doing, even when you have begun a startup. While in the beginning it may be deemed necessary to put a massive amount of effort into making your business profitable, the practice shouldn’t continue for the long term. It might seem counterproductive, but if you have an 80 hour week at work, you don’t have a profitable business. Wondering why? Give it a thought that if you have to break your bone to keep the numbers afloat, then what will be the figures once you scale back to normal work life if your health doesn’t collapse earlier? It means something is wrong with your budgeting of time and finances. You should begin taking account of your labor costs.
5. Select the Correct Investors
Having the correct investor can be a real boost for your business but it can also lead to a vicious circle of debt. So if you are willing to approach an investor to scale your business up, you must research them well. Find out the details of recent ventures they made. The amount funded, the amount of involvement they want into the business decisions, the debt-cycle provided. If the debt cycle matches the revenue cycle of your business or does it require to be modified.
The aforementioned are some basic yet essential tips that a business owner should follow to keep a track of the financials, keeping daily operations afloat, strategizing, and managing personnel simultaneously. If all the important aspects of the business are kept in check, the growth will be a smooth process.