For many people, the idea of starting their own business and working for themselves is a pipe dream, but more and more people are taking the risk and starting a company of their own. It’s arguably easier and cheaper to do so now than it ever has been, with the internet helping to keep costs down.
Whilst the average business can be started with just a few thousand dollars, the costs can quickly mount in the first year, with most estimates pointing towards first full year fees of $40,000. Most people who start a business don’t have this much money saved up, meaning a lot of it will come from loans, investors, and small income streams that open up along the way.
It’s likely that your startup won’t make a profit in the first year, and whilst this is largely normal, you won’t stand to make any money if you don’t have a good handle on your finances early on. This means you need to be strict and implement financial systems, processes, and procedures early on.
Here are some top tips you can take on board for handling your startup finances.
Monitor your cashflow
First of all, you need to monitor your cashflow. It’s a good idea to invest in accounting software as soon as possible so you can log what money is coming in and what money is going out. Not only is this essential for bookkeeping and tax purposes, but it can also help you identify spending patterns and highlight any areas where you could either be making more money or saving money by cutting back.
It’s a good idea to get into the habit of meticulously tracking everything you spend and everything you have coming in. It might seem tedious at the time, but it’ll serve you well further down the line.
Cut back on unnecessary expenses
After you’ve got into the habit of logging and monitoring your cashflow, you can start to look at any unnecessary expenses you’re spending on. In the same way a lot of us don’t know exactly what’s coming in and out of our personal bank accounts until we take a closer look, businesses and their associated expenses can work in the same way. You may not know that you’re spending $100 a month on random subscriptions or memberships that you don’t actually need and could cut back on. Monitoring cashflow will help you identify areas where you can save money.
Always have an emergency buffer fund
Business rarely runs smoothly and there’s a good chance you might have a lot of unexpected costs in the first year. Like your personal finances, it’s always beneficial to have an emergency fund to cover costs that you haven’t accounted for. This could be the difference between your business staying afloat or going under before it’s even got started.
Hire an accountant as a priority
The best way to keep on top of your finances is to hire an accountant. They’ll be able to keep track of your expenditure and complete an audit of your accounts to help you better understand your income and outgoings and streamline your business. Accountants can also help you find good accounting software, ensure your taxes are paid properly, and even offer advice and guidance on getting funding and investment from third parties.
If you want your business to grow, an accountant could be a valuable asset, and you don’t need to pay excessive amounts for one, either.
Handling startup finances can be somewhat daunting and overwhelming, but if you take our tips on board, you should be able to get a good handle on things.