Financial startup basics are essentials that startups need to know to ensure financial health and secure the funds required for growth. Nine out of ten startup failures result from the absence of these fundamentals. The reason is simple – cash flow. Without an understanding of how to track and project cash flow, a new business cannot manage its budget or invest in growth.
Important startup accounting records such as income statements (revenue and expenses) and financial projections are essential to prove the viability your business model to investors. These models need to great post to read be carefully constructed to accurately reflect your company’s true financials which includes easy to overlook costs like shipping, taxes and insurance, payment processing fees, and utilities.
In the beginning startups may be able to get financing from family and friends if more traditional lenders are not an alternative. But, in this case it is crucial to write any loan conditions in writing so that there are no conflicts regarding repayment obligations or expectations for future performance.
Startups may also look for venture capital from a private investor or even crowdfunding platforms such as Kickstarter. These types of funding often require a written business plan, which includes a detailed financial forecast. You can better understand the financial situation of your business by creating the model. This will help you make informed decisions on the amount of capital you can invest and what strategic goals you want to achieve in the next year.
