Mastering Financial Management: Essential Tips for Startup Success in 2023
Navigate the financial challenges of starting a business and achieve long-term stability with these practical strategies and expert insights.
Starting a business is exciting, but it can also be unnerving, especially from a financial sense. Keeping your fledgling company on track financially in the beginning stages is not only one of the most important things to ensure success but also one of the most challenging. Being that businesses are made or broken on the type of cash flow that is created within the first few months, it is vital to the success of a startup to understand what and how to manage the financial side of any business.
Not only will having this knowledge make you more confident and prepared to make smart business decisions, but it will also be a source of stability if and when things become a bit uncertain.
Many people, whether business owners or founders, have little to no financial acumen. All startups have associated costs, but a limited cash reserve means that hiring a full-time accountant might not be possible. The good news is that there are plenty of resources available for free in the form of books, articles, videos etc., so gathering helpful information is never far from anyone’s accessibility. There is plenty to be found online, and we’ve compiled a brief listing of some money management advice for startup businesses.
The most basic principle of money management is simply being able to track and record cash flow; you should know where money is coming from and where it is going over the course of a week, month and year. The ability to track all of this on a daily basis is incredibly important.
Since your new business is likely a start up, you will have to use projections and goals for the first few months to maintain consistent goals; concentrating on project revenues, production and operation costs and revenue will help to set a picture of how to manage cash flow as the business progresses and hopefully grows.
In this sense, it is necessary to figure out each of the variables which make up your business. Until you do that, you will be at a disadvantage when it comes to accurately tracking cash flow.
Predicting cash flow will also help answer the question of whether a business loan or investment baking strategies should be considered.
Knowing where money is coming from and going allows for an understanding of necessary expenditures, as well as what’s draining revenue or cash reserves. While this may take some time to narrow down, being that the company is still young and some things that seemed essential are no longer a priority, bewing on the lookout for such unnecessary expenses will help to buffer your business.
Many people tend to focus on the large expenses — flights, new office equipment, travel costs— those are much easier to spot. However, it is often smaller, less conspicuous costs that can be the real drain in the long run, so checking for those little expenditures and weighing their usefulness will be a great practice to maintain moving forward.
Establishing a payment collection system
One of the most satisfying and straightforward ways to run a successful business is to create a payment system that is easy for you and your clients to use. Everyone likes to get paid, and watching the payment come in — especially after weeks of hard work on a project — is that positive reinforcement that a business owner needs to keep a business afloat but emotionally.
Ideally, establishing credit guidelines, collection timelines and payment policies should be in place before you have your first customers. Staying on top of payments will be easy with most modern software systems, but what those systems may not consider is what to do if a customer doesn’t make a payment on time. As such, give some thought to how to manage late customer payments.
Understanding tax obligations
No one likes taxes, but they are unavoidable. Understanding how they affect your business is essential. While many see taxes as a negative thing, there are plenty of ways that business owners can utilize tax cuts and write-offs in ways that can support the development and success of a company.
Hiring a tax professional early to walk you through the basics of what type of company you should file as, what types of things can be written off and how to manage the funds associated with revenue will be a great ease off a busy mind when other aspects of a business are going smoothly.
Andrew Deen has been a consultant for startups in a number of industries from retail to medical devices and everything in between. He implements lean methodology and is currently writing a book about scaling up business.