Financial Planning Tips for Startups
Have you ever considered starting a business? If you have a great idea for a business, you may be in the early planning stages or well on your way to making a profit. However, financial planning is a step you don’t want to forget. It is vital to the success of startups. Therefore, consider these financial planning tips.
Focus on Simple Accounting
Many accounting systems and software programs have numerous options and tools, but as a new business, you only need the basics. It should be easy to work with and be able to grow as your company grows. Whether you choose to invest in software and an accounting staff member or outsource, start simple.
Develop Accounts Payable and Receivable Processes
Early in your company’s lifecycle, you need to watch your cash flow carefully. You should know all your expenses. Then, you need to develop a plan to pay for them. Track your expenses, and always pay your bills on time.
Next, develop a process for collecting your accounts receivable. Create guidelines for consumer credit and collections timelines. Adopt a system that allows you to view all outstanding payables quickly and easily, and stay on top of invoicing your clients. You may even offer incentives for early payments.
Build Relationships With Bankers
If you ever need debt financing, you want to contact numerous credit institutions to compare rates and fees. When you build relationships with financial institutions, you have access to assistance when you need it. Your banking partners may also tell you when rates are especially favorable and give you information about financial options you may not have considered.
Choose a primary bank that offers you the services you desire. For example, if you prefer in-person banking, don’t choose a bank that charges a fee to speak with a representative. However, if you can do most of your banking online, you may choose a bank with expanded online services. Also, find a financial institution that has worked extensively with startups.
Learn What Investors Want
If you plan to seek investments either at the beginning of your startup or after you have gained customers and are ready to expand, you need to understand what they want. They want strategies. You need to know your business inside and out. You should have a realistic short- and long-term vision. You also need to analyze different business scenarios by calculating your expenses, return on investment, prospective revenue and cash flows. In fact, all your expenses should be clearly outlined and justifiable. You also need extensive industry and market knowledge, and you should be able to anticipate future changes.
Financial planning ensures that you are smart about your spending. It guides your startups’ decisions and ensures that you stay on track.
