You shouldn’t neglect your startup’s financial health during the critical early stages. The ultimate success of your startup business depends on how well you operate and manage your finances.
- Learn about every aspect of your corporate finance and make financial projections so you can anticipate estimated corrections and profitable times.
- Banks, alternative lenders, and peer-to-peer lenders are resources to turn to if you need money to grow your business.
- The main aim of this article is to educate startup entrepreneurs who are starting a new business and want to know how to manage their startup’s financial health.
In the early stages of a startup, funding may be the last thing you want to think about, but putting aside financial planning is a bad habit for new entrepreneurs. Pressure to succeed and be profitable can put a strain on any new business. Regardless of your level of knowledge of corporate finance, there are a few key questions and resources you should keep in mind.
Here are seven steps you can take to begin the financial preparation process.
- Open a Commercial Bank Account
A commercial bank account is one of the most important parts of organizing your startup finances. Whether you are opening a checking account, a cash management account or a savings account, opening a commercial bank account makes sense for the following reasons:
Preparing yourself for tax season. The separation of business and personal expenses makes tax returns easier. If you skip this step, tax season is approaching and it can be difficult to separate business and personal expenses. This can lead to lost discounts or create a sourcing nightmare in the future.
Provides legal protection. A commercial bank account can protect you from personal liability to a limited extent, depending on the legal form of your company. For example, if your company is sued, a commercial bank account can help prove that your company is a separate entity from you, which can protect your personal assets.
Makes you look more professional. With a commercial bank account, clients and customers can pay for your business instead of making payments to you in person. This ensures that your project has a more professional look.
Main Takeaway: A commercial bank account is essential as it separates personal and business finances.
- Educate Yourself on Financial Literacy
It takes time to put together the right learning tools and resources to understand and manage your business finances, but it will save you a lot of stress and money. If you don’t understand something, don’t be afraid to confess.
“A very small percentage of new business owners are successful on every financial issue, and even fewer of them understand all of the numbers on the page,” said Barry Multz, financial advisor, author and spokesman for the Small Business Administration. Additionally, by educating yourself and utilizing proper financial fraud protection you ensure that you and your businesses are protected from day to financial threats.
Main Takeaway: You don’t have to be a full fledged corporate finance expert, but you should know what it all means and how to track and manage it.
- Manage Your Cash Flow
Cash flow is money that goes in and out of your business. When you are making more money than you are spending, you have positive cash flow. Given that 61% of small businesses around the world are struggling with cash flow, you need to pay a lot of attention to your business. Here are some ways to avoid negative cash flow:
Send invoices asap.
Take care of your debts and savings.
Borrow before you need it.
Rate your business to see where you can save.
Adjust your balance to save money.
Main Takeaway: Manage your company’s cash flow by quickly creating and submitting invoices, reducing costs and debt where possible, and adjusting inventory as needed.
- Research Your Financial Needs
While some business owners start their own projects, others use outside funding to grow their business. There are many things to keep in mind while going down this route, including how much money you need, loan repayment terms, your creditworthiness, and when you will need the money. Not every type of financing is suitable for your company. So determine exactly what your company needs in order to make informed decisions.
Below are some financing options for entrepreneurs and small business owners:
Conventional lending from banks
Commercial lines of credit
Main Takeaway: Small businesses have many financing options, including bank loans, grants, and alternative lenders.
Your time and money are precious so you want to make sure they are being used effectively. You need more than luck to be successful in the financial and entrepreneurial world. Being in a rush will only hurt your business in the long run. Instead, redirect your thinking to the good things in life, such as money and energy.Track Latest News Live on CEOWORLD magazine and get news updates from the United States and around the world. The views expressed are those of the author and are not necessarily those of the CEOWORLD magazine.
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