Finance is the spinal cord of every business. If you are a startup business organization, it is essential for you to manage your finances and accounts. If your accounts are streamlined and managed efficiently, it leads to enhanced performance and cost reduction. Many startup organizations which do not keep a proper record of their accounts face challenges to solve their high expenditures.
They cannot trace the expenses and incomes as their transactions are not recorded by hiring a financial expert. It helps to track business growth and financial position.
Especially startups that make the mistake of putting all their money somewhere that will not create a ROI. To avoid such pitfalls, you can use the help of a financial expert who covers areas such as bookkeeping and business analyses - taking on the responsibility to maintain a complete record of your financial transactions. In addition, they would provide you with a dedicated and whole-time accounting service.
6 ACTION POINTS FOR BETTER FINANCIAL MANAGEMENT:
1. BUSINESS BANK ACCOUNT
Opening a business bank account is the first step to getting your startup's finances in order. Whether you open a checking account, cash management account, or savings account. It will help you in many aspects:
IT HELPS YOU TO BE READY FOR TAX SEASON. Keeping your business and personal expenses separate will make it easier to file taxes.
IT GIVES LEGAL PROTECTION. A business bank account can limit your personal liability based on your company’s legal form.
IT MAKES YOU PROFESSIONAL. A business bank account creates good impressions of your business and helps to on-board good suppliers.
2. GET FAMILIAR WITH NUMBERS
Getting familiar with numbers is very important to understand the financial position of your business. It doesn’t mean you have to study accounting and know it in detail. But you should know how to evaluate your business based on financial statements. It will also make you confident about your business and helps confidently present your financial position in meetings with board members or investors.
3. CASH FLOW MANAGEMENT
Cashflow is the money that moves in and out of your business. When you create more cash inflow than outflow, you have a positive cash flow.
Some tips to keep positive cashflow
· Send invoices in real time
· Reduce credit period maximum
· Motivate your clients to pay invoices with discounts or incentives
· Set a good timeline for credit periods with suppliers
· Evaluate what you have as cash and what will come in the next 7 days - use this as a base to make decisions for expenses
· Cut away unnecessary expenses - even if it's a small amount, don't ignore it
4. CREATE YOUR BUDGET PLAN FOR A YEAR
Creating a budget plan and a strategy of do’s & don’ts will help you to have limited and stable expenses
· Split it into a detailed category of expenses - it helps you with reducing taxes. Also, reduce expenses that do not count into tax deduction.
· Create a budget for unexpected big expenses. I will help you to be balanced even if you had a pitfall
5. CREATE A SALES PLAN AGAINST THE BUDGET PLAN
To stay on the top, you need better cash flow. For this you need a target of revenues and other sources of income to cover your expenses. An example for other sources of income could be: renting out any property that your company owns or investing in other small successful businesses, etc. When you can cover the majority of your expenses with a passive source which doesn't have expenses at all, that’s the win.
6. UTILIZE EXPERTS
Arrange a weekly meeting with your chartered accountant and sales team. Make sure they stay motivated, appreciated, advised and focused on your business goals. It gives your team a direction of how to act in difficult situations and how to work on the same goals. Having a financial expert in your meetings will help you to understand the purpose of your goals and targets.
Valuable Tips from Financial Experts
Comprehensive Recording of Financial Transactions: startup companies are not adept at recording their financial transactions, which may lead to repercussions. Professional financial experts ensure that all your financial transactions are recorded, and not a single transaction is omitted. They adopt a holistic approach in recording business transactions systematically. For small businesses the best option for this is to work with a bookkeeper.
Bookkeeping: It is extremely significant to maintain the books of your business in the form of a journal, ledger, and cash flow statements etc. These financial experts also provide you with a bookkeeping startup guide that helps you understand the relevance of the books. The bookkeeping startup guide elaborates the need to understand finances and numbers in your business.
Preparation of Financial Statements: The financial experts also prepare impeccable financial statements for your business. They prepare the Profit and Loss Statements, Balance Sheets and Income Reconciliation statements. If you are a startup company, it is important that you hire specialised services from financial experts. It helps you to stay in control of your business & reduce unnecessary costs.
Cost Reduction: Another valuable tip for startups is to manage their costs and expenditures. If you hire a financial expert for your business, startup costs are reduced to a great extent. You can focus on your core competency and leave the account management and bookkeeping to these financial experts who are veterans in their field and deliver the best results.
Financial experts like chartered accountants can help in many issues regarding legal matters, registration, or explaining your business rights when your business becomes a vendor or as a consumer.
Dedicated Accountant: These professional organisations provide you with a whole-time Accountant for your Startup Business who is responsible for and diligently handles your accounts. They have expertise and experience and use their accounting knowledge to manage your accounts and give you valuable advice.
In conclusion we can say that it is important to understand that your personal strengths in your business are depending on understanding your numbers. It doesn’t mean you have to be an expert in all things accounting, but it is beneficial for you to have the ability to monitor cash inflows & outflows and control it based on periodic patterns.
Are you having more questions? Please feel free to chat with our experts.