Financial Startup Basics
The financial complexities associated with starting a new business may seem overwhelming. Understanding the most important terms in finance for startups can help you make educated decisions and efficiently manage your resources.
Basic Bookkeeping: Accurate record keeping is the basis of financial management. It’s essential for any startup that wants to secure funding from lenders or investors. This includes GAAP conforming financial statements (income, expenses) cash flow, the balance sheet.
Revenue & Costs – Monitoring and tracking revenue, operational expenses, along with other costs is an essential element of the financial startup fundamentals. This process helps startups manage the acquisition of customers, customer turnover and revenue growth. It also helps them understand impact of pricing for customers, product features, and other variables on their bottom line.
Financing: Startups rely on personal loans and credit cards to fund their operations. This is an expensive and risky option for startups, especially when they fail to meet their obligations to repay. Alternative methods of financing for startups include business lines of credit, equipment leasing and crowdsourcing platforms.
Cash Flow: Startups must to be able predict their cash position at any given moment. This isn’t easy for startups who bill annually or in arrears according to the usage. They are unable to provide an accurate picture of their financial situation over time. Streamlining the payment process and ensuring payments to vendors are received on time, and accurately recording ownership of equity can aid startups in avoiding cash flow problems.