Financial startup basics are the essentials that startups need to be aware of to ensure financial health and secure the funds required for growth. Nine out of ten failures in startups are the result of a lack of these essentials. Cash flow is the primary reason. Without understanding how to track and project cash flow, a start-up cannot manage its budget or invest in growth.
Key startup accounting records like income statements (revenue and expenses) and financial projections are necessary to prove the viability your business plan to investors. These models must be carefully calculated to accurately represent the true economics of your company and include the easy to overlook expenses like taxes, shipping and insurance, payment processing fees, and utility charges.
In the early stages, startups can obtain financing from family and friends if traditional lenders aren’t an alternative. In this instance however, it’s important to have any terms of the loan written down so that there aren’t any conflicts over the repayment obligation or future performance expectations.
Startups can also search for venture capital from private investors or crowdfunding platforms such as Kickstarter. These types of financing usually require a business plan which includes a detailed financial forecast. You can gain a better understanding of your company’s finances by constructing the model. This will allow you to make informed decisions about how much capital to put into and what strategic goals you want to attain in the coming year.