Establishing a strong financial infrastructure is critical when starting a new business, yet it’s often an afterthought for early-stage entrepreneurs. Every organization is always interested in one thing – managing financial transactions. Running a business requires making a lot of financial decisions. What practices can you use to help you manage your startup finance efficiently?
1) Putting a cap on operations
Haven’t we all heard success stories that started from a one-bedroom apartment or garage? For an early stage startup, the start is usually not with a splash. With modest means, you can start small to save on running an operational office. Until you raise your first round of funds, you should handle your finances cautiously. If need be, don’t hire any new employees other than the core team.
Also, you should not raise funds if you don’t really need it as it will be the most expensive cash you ever buy!
2) Manage and log in all your expenses
It is crucial for every entrepreneur to keep track of all their expenses to ensure they are not going overboard. When you start, keep it basic.
You should also learn timeless principles of managing your expenses. To do this, read financial statements to know about your money, income, and expenditure. If your costs are higher than your profit, then your startup will sooner or later collapse. Maintaining financial stability requires knowing four essential details as listed below:
Balance sheet – This reflects shareholders’ equity, liabilities, and a company’s assets.
Income statement – This reflects the revenue your organization makes within a specified period.
Statement of shareholders’ equity – This represents the funds that the business gets through preferred and common shares.
Cash flow statement – This analyzes your cash inflow and outflow, investments and operating activities.
Documenting transactions right from the start doesn’t take much time. In reality, it really comes in handy later during fund raising when the due diligence is…