Running a business means making a lot of financial decisions. And as a startup owner or new entrepreneur, the decisions available to you will be largely based on finances. Let’s be clear when you are in the early stages of starting a business, it is highly unlikely you will be in a position to get VC funding. The money will be tight unless you have plenty of savings. And making any kind of progress is going to be tough if you don’t have a secure financial footing. This makes managing your money even more importance. With this in mind, here are some best practices to consider as a startup.
Manage ALL Expenses
When you are first starting out, it’s easy to spend what money you have available. However, unless you are tracking every cent, you will soon hit troubled waters. It is critical to track and trace your expenses from day one. Do not leave it as a job to do for tomorrow. Make sure you have the four essentials in place, which are your income statement, a cash flow statement, a statement of shareholder’s equity (if applicable) and a balance sheet.
Hand Over The Keys
Starting a business is challenging. If you want success, you will need to put every ounce of energy into making it work. With this in mind, it makes sense to free up as much time as possible for yourself. Outsourcing is a great way to do this, and one of the best places to start is with your finances. Look for outsourced accounting services to help you ensure your income, cash flow, and the balance sheet is looking good – and that you are paying the relevant taxes. It is a huge challenge to manage money properly, especially when you have a million and one other things to do.
Understand Tax Payments
Regardless of whether you have someone to look after your accounts or not, the reality is that as a business owner you have to plan your tax payment. Your accountant will help you, of course, but unless you want to get into trouble with the IRS, you will need to ensure you have money put aside a plan of action, and a credible bookkeeping system. One problem that catches out a lot of rookie entrepreneurs is when they mix up their personal accounts with their business accounts – avoid this as it almost always results in trouble.
Monitor And Measure
Finally, make sure you know what you are paying for is working. Using standard financial ratios will help reveal whether your business is overperforming or underperforming while monitoring your figures will help you show the best possible ways of keeping your finances in rude health. The idea here is to minimize inefficiencies and maximize your efficiencies.
The better you manage your business’s money, the more chance there is of finding success. A strong financial foundation is essential if you want to survive – and thrive.
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