The basics of financial startups are essential that startups must be aware of to ensure their financial stability and to secure the funding they require for growth. Without these fundamentals nine out of 10 startups fail. Cash flow is the primary reason. Without a grasp of how to monitor and forecast cash flow, a start-up cannot manage its budget or invest in growth.
Important startup accounting records such as income statements (revenue and expenses) and financial projections are vital to prove the viability your business model to investors. These models need to be carefully calculated in order to accurately reflect your company’s economics. This includes easily overlooked expenses like shipping, taxes and the cost of insurance, payment processing fees and utility costs.
In the early stages startup companies can get funding from family and friends if more traditional lenders aren’t an option. However, in this scenario it my company is crucial to write the loan terms in writing to ensure that there are no disputes over repayment obligations, or expectations for future performance.
Startups may also seek venture capital from a private investor or even crowdfunding platforms like Kickstarter. However, these kinds of financing usually require an approved business plan which includes a thorough financial model. Creating a model allows you to understand your company’s finances, allowing you to make educated decisions regarding the amount of capital you will require and the strategic goals you’d like to achieve by the time next year rolls around.
