The health of your finances is directly proportionate to the success of your startup. In business, it’s not about saving money, but judicious use of available resources. Here’s what you need for better financial management of your startup.
1. Learn to cut costs
Before your startup reaches the break-even, you will realize that you cannot make profits without cutting costs. In order to know and understand about your finances and especially expenses, you will need to know the following details –
· Cash flow statement
· Income statement
· Balance sheet
Your cash flow statement reflects the in and outflow of cash; the income statement tells you the revenue your startup made within certain period while the balance sheet shows these two apart from the liabilities and assets of your business. These statements should give you a clear picture of your finances every month. Find ways to cut costs, eliminate expenses that you can do without. For instance, do you need to pay a digital marketing agency? You can use automated social media tools. Similarly, use various free tools of email marketing, CRM etc.
2. Maintain financial discipline
Keep your personal and corporate accounts separately. Make sure you save enough money for yourself and your business every month. This will always keep you ready for any emergency situation in future and will compel you to keep a cash flow in the business. Create a financial plan that works for your business. Get professional advice or watch tutorials about creating robust financial plan. Get an accounting software that gives you an overview of your finances. Financial stability will always keep your business running, will help generate good leads for your business and will save you from any unforeseen tax burdens or expenses.
3. Measure performance
As a small business owners, you need to not only know what are your expenses but also how is your money spent. Your accounting software should have the bandwidth for recording every financial transaction that happens in your business. Make sure it also gives you a detailed account of your past financial statements. Through this, you can ascertain your common financial ratios to help you see if your business is underperforming or performing at an expected level. This kind of measurement would help you reduce wastage and to judiciously utilize your money.
4. Get a cloud accounting system
Cloud accounting is proving to be most efficient especially for small and medium businesses. It helps your business work faster and smarter and saves a lot of your time, energy and resources. Cloud accounting helps your team collaborate easily and provides an overview of your financial transactions. Since it gives you a multi-user access, you can collaborate with experts, advisors and your investors. Cloud accounting also helps you automating tasks that otherwise waste a lot of your time. These include assessing regular payables and receivables, sending payment reminders, getting access to accounts while travelling etc. Cloud accounting system helps you run your business from practically anywhere. Your data is always secure while you save on administration costs, version upgrades or maintenance.
5. Get a hang of taxation and payments
You have to face it at some point. You might as well now. Right from the beginning of your business, make sure you know the taxation norms about your industry. Speak to your accountant or tax advisors or get help online. If you want to save costs here, talk to peers in the same industry or friends who run similar businesses. It’s possible to keep a good tax plans since taxes don’t change overnight. Following tips would help you create a credible tax plan for your business –
– Have a running book-keeping and accounting system in place.
– Get in touch with a credible and a certified tax planner or accountant who will help you with filing your taxes.
– Keep your personal credit card away when you are making company expenses. This would save you a lot of confusion.
– Set up funds for either charity or retirement because these are tax deductible and would give you exemptions in India.
Financial planning and management are crucial steps in running a sustainable business. If you need help about managing your finances, talk to us.