If your company is in its early stages, short-term survival is probably top-of-mind for you and your skeleton staff. To properly plan and work to keep the business afloat, you need to be focusing on your finances. It can be overwhelming trying to figure out what you need to think about, so here are four financial tips for new start-ups.
Get financial help if you need it
Starting a business is expensive. It can be quite stressful dealing with the financial side of the company when you don’t have much cash flow yet and trying to fund the whole venture yourself or with outside investments may not be enough.
Borrowing money from lenders is an excellent way to get some short-term cash to help make ends meet while business is still picking up. If you know you can pay your loan back on time to avoid high-interest rates and penalty fees, this may be the route that makes the most sense when trying to establish a quick cash flow. If your business has a fleet of vehicles, you can use your cars to secure log book loans by transferring ownership as collateral. You can still use your vehicles while you’re repaying the loans, but you’ll also have access to finances that can help you if you’re in a pinch.
You could also try peer-to-peer lending, also referred to as P2P lending. Lenders are matched with business owners who are looking for a loan through an online service. The process is entirely safe, but just like with any type of loan, there is a certain risk involved. If you do go down the P2P lending route, make sure to diversify your money across a few different lenders to mitigate the risk.
Establish your accounting system
New start-ups don’t need any fancy accounting systems right off the bat. They do, however, need to establish an accounting system that is simple to use and can grow with them as the business becomes more established and developed. The most common choice among new start-ups is to use QuickBooks, though there are a few other options available as well. Regardless of the system you set up, remember that it’s much easier to establish your system from the beginning rather than trying to adapt it into a system later when your finances are more complicated.
Figure out your budget
Determining what your business’s budget is will help immensely, not just with keeping the business afloat during the first few years, but also with setting up other more complex processes and systems. To find out what your budget is, calculate your expenses, and subtract them from any revenue your business is earning. Add in any resources your business will need and the costs involved (for example, any SaaS you’re going to invest in). Then you can get a good idea of how much money your business has available to spend.
Develop your financial forecast
It’s essential to create a bottom-up financial projection that uses your budget and sales projection as a baseline. Be sure to include all estimates for spending for each department in your business, including HR, IT, marketing, legal, and any other professional services. A good tip is to keep your projection within three years, as anything after that length of time isn’t meaningful, as your business can significantly change in that time frame. Make sure to update your financial forecast whenever you make a significant change in your business plan or hit any business or financial milestones.
