New and small startups always have problems with handling their finances. Regardless of how good ideas and teams are behind them, setting up a new company is much harder than anyone thinks and funding is usually the biggest problem.
However, there are ways to get a grip on your finances early on. They require a bit of planning and control over your spending. The first is usually manageable, but the second part tends to get out of hand.
Track your spending
The best way to plan ahead is to know how much you’re spending and where your money is going. This can be easily accomplished by keeping close track of your expenses. It’s best to do this for a while and thus get a handle of the cycles through which your company is going. Regardless of what business you have, everyone goes through ups and downs.
When your spending is done via apps and business accounts, tracking becomes much easier, since you can automate it. Still, there are a lot of cash expenses that get overlooked so make it a rule to write every expense down for at least six months.
Unforeseen expenses can’t be limited since you don’t know when they’ll arise. Other, fixed expenses can be controlled and they should be, at least at first. Try to come up with an estimate as to how much you can spend and figure out what expenses are vital to your business.
There are only a few areas on which you shouldn’t save no matter what. That’s the quality of your products and customer services. You should always present your company in the best possible light and the expenses related to that should be your top priority.
Taking out a small loan is usually the best way to finance a business. However, the key is to choose a loan that’s suited to the needs of a startup. These startup business loans should take into consideration the expenses of a new business. That means that a loan should be repaid only when you start making revenue.
It’s best to borrow more than you actually need in order to prepare for the expenses that might come up and that you haven’t planned on. Alternatively, a credit line might be a good choice as well, but that depends on how much revenue you can count on each month.
A payment collection process
Small businesses usually have a problem with collecting payments. They need funds to be available on a relatively close schedule and that’s not something that can always be accomplished if you’re waiting on a payment from someone.
One of the ways to go is to use invoicing that will let you collect your payments right away (for a small fee)and the debt is then transferred to a financial institution providing the invoices. That way, you get less money than you could, but you have a clear payment schedule.
There are some professionals in the field of finances a business should hire as soon as it has the resources to do so. With small businesses, there are always ways to cut costs and do things on your own, but finances should be left to those who know what they are doing for the sake of the company.
An accountant is the first one to hire since they could help your company the most and save you the most money. A financial advisor should probably be the second, as soon as you’re ready for one.
Managing small business finances isn’t easy and it needs to be done with a clear plan in mind. Try to work on small things but in a way that would move you toward a larger goal.