29 Set Financial Startup Basics
The financial startup basics are the essentials that startups need to be aware of to ensure their financial health and secure the funds needed to grow. Without these basics nine out of ten startups fail. The reason is straightforward – cash flow. Without an understanding of how to track and forecast cash flow, startups will be unable to manage its budget or invest in growth.
The most important accounting records for startups like income statements (revenue and expenses) and financial projections are necessary to prove the viability your business model to investors. These models need to be carefully calculated to accurately represent the true economics of your business as well as the easy to overlook expenses like taxes, shipping as well as insurance, payment processing fees, and utility charges.
In the beginning startup companies can get funding from friends and family members if traditional lenders aren’t an option. However, in this scenario it’s crucial to set the loan terms in writing so that there are no disagreements regarding repayment obligations or expectations for future performance.
Startups can also search for venture capital from crowdfunding platforms or private investors like Kickstarter. However, these kinds of financing often require an approved business plan which includes a thorough financial model. You can better understand the financials of your business by creating the model. This will help you make informed decisions on the amount of capital to invest and what strategic goals to achieve in the next year.