Running any business is challenging financially and this is especially true in the case of a start-up. It has the initial cash injection but after that it is up to the diligence of the employees, their management, and the final product or service to provide the company with constant funding. In the first few years, every penny counts so a start-up needs to make financial management a top priority. Once the cash from profits starts flowing in, everybody can breathe a sigh of relief but until that happens, start-ups should follow strict rules when it comes to financial management.
Keep a close eye on financial transactions
There is nothing wrong with money leaving your account, as these are largely investments that are perfectly normal. However, all transactions should be monitored in order to keep track of how the money at your disposal is being spent. By having a daily insight into the cash flow, you can manage expenses better and get a better idea of where to invest. Constantly checking the balance sheet is not an obsession but a valid method to determine if the business is going through tough times. Being clueless is simply not an option in financial operations, as true success can be achieved only through meticulous planning. In order to make a financial estimate, you need to know the figures, so make sure your financial department doesn’t sleep on the job.
Overspending the home budget or a personal wage is nothing like overspending company’s money. First of all, people have a constant inflow of money in the form of the paycheck, so they can afford to overspend one month as the next month’s income will cover that. A start-up cannot afford the luxury of counting on secure income as the future of the whole project hangs in the balance (sheet), pun intended. At first, don’t spend more than you are making as any large-scale expenditure could drive the business into the red it will never recover from. Big corporations can afford the risk of such behavior on the financial market but start-ups simply lack the infrastructure to speculate in that way. Setting up a start-up is already a huge leap of faith; you don’t want to push your luck further.
Hopefully, things will work out for your start-up and you will soon start making profit from the product or service you sell or offer. Some entrepreneurs get carried away by this initial success and start collecting the profits right away, which is the wrong way to go. No matter how big the profits are; even if you can afford a hillside house with a pool; don’t be tempted to spend the initial profits! They should be pumped right back into the enterprise to boost production or they can be used to increase workers’ wages in order to further increase productivity. In this case, money makes money, so that victory champagne will have to wait in the cooler for at least another six months until time confirms the financial success of your start-up.
Even people who own a grocery store or a sports equipment center hate chargeback, despite the fact that they don’t influence their daily operation to a large extent. Chargebacks can be quite pesky as the merchant falls the victim to the lack of communication between the cardholder and the issuing bank. For a startup-up, however, a chargeback could spell disaster because they usually sell a single service or product as a whole, so their entire operation becomes jeopardized. Imagine developing a computer program for six months and then running into a fraudulent client who has unknown to you, issues with his bank. In order not to lose tens of thousands of dollar and compromise your product, a chargeback is something that should be prevented. There are numerous agencies that offer help with this issue so why not spend an extra dollar to protect your finances against such dangers.
Economics is an exact science since it deals with numbers, which is the main reason why there isn’t much bargaining in the financial market. You receive an offer and then there are two options, you either accept it or reject it. Well, the world of trade is not that black and white, so it is important to at least try to negotiate a better deal as your start-up needs every penny that it can save up. You simply cannot afford to reject deal after deal as start-ups need new clients and projects, even if they are not that profitable at first. It is perfectly OK to ask for a higher price, an extra day to pay for the service or demand a down payment. Once you start negotiating, you’ll see how flexible the financial market really is.
Finally, try to center all your finances around the product or service you offer. This is any start-up’s strongest selling point that has the potential to turn the initial investment into profit.