You may have enough cash in hand or know about different sources to raise the desired fund to start your business but it is very important that you manage these available funds carefully. This will prevent unnecessary expenses and spending off the entire amount leaving several other things to acquire. Remember, it may be very easy to get resources especially with the availability of credit cards and liberal money lending policy but it is even easier to spend it all in whims and fancy in a blink of an eye.
The most significant and perhaps the hardest part is managing the money you have in hand. Managing money is a big problem for everyone today but the startups especially are notoriously known to experience problems and more often than not fail in proper money management. One of the most significant reasons for such failure of the startups is that they mismanaged the funds they have not knowing what to do with the sudden inflow of cash.
Useful steps to follow
This article will show you how to go about it successfully so that you can keep your small business running with its finances healthy, strong and adequate in the long-term. All you have to do is adopt good financial behavior to ensure that your startup has the best prospects and the best possible chance to succeed.
Availability of money:
To start with your money management endeavor, you must know exactly how much money you currently have. Look at your finances to pinpoint it instantly. However, this money may not be the money that is available to you to use but may include any receivables as well. Such in-depth knowledge will allow you to know whether you are in the red or in the black.
Make sure that you perform a status check and prepare a report at the end of each month as well. This will help you to know exactly how much money you have at that specific moment. Also, make it a point to update your spreadsheet on a regular basis at the end of each month. This will prevent any financial trouble sneaking up on you.
You must also know how to budget your finance taking into consideration each department of your business. this will not only enable you to know how much money each section has in hand but will also let you know about the areas of expenditure for each specific department. In turn, it will help you to allocate the budget for each of these departments according to its need and your choice as well. If you want to spend more on marketing and advertisement you can allocate most there spread it across evenly on product development and research, training, hiring and other aspects of your business. The point of proper budgeting is to know where all the money is going and on what it is being spent. Review the performance of each department every now and then so that you can make curtailments for the low ones and allocate the excess money elsewhere.
Debt management is an important aspect for any business, startup or other as debt is something that you will always incur. A debt, however, does not signify or entail only loans taken out from banks and other lines of credit but also your bills payable and even your bills receivable, considering the positive and negative perspectives of cash flow. Knowing about your debts well will help you to manage it properly and prevent you from contemplating taking out a consolidation loan after going through a number of debt consolidation feedback and reviews. Also consider the loans you have taken out, the number of monthly payments to make and the resources to arrange money to make these payments on time to avoid interest accruals.
It is required that as a startup you are positive in your business approach and are ready to scale up or down as and when required by the prevailing situations. This is another art to manage your business finances wisely. Consider your financial fortunes so that you can make arrangements beforehand to keep the momentum rolling. This will help you to manage to score a breakthrough and at the same time provide your business with a breathing room by scaling down your operations when required. Never be overly conservative or spend everything that you have at one shot.
It is essentially required to create a savings fund for your business to deal with emergency situations and in times of terrible downturns. Startups need such funds especially as they will face more ‘rainy days’ unlike the established companies who already have such a fund at disposal. If you do not have such a fund then your business will be more vulnerable and you will have no more reserves to work with and keep your business running. Therefore, rather than reinvesting everything back into the business it is better to set aside a small amount, say 5% of it, and put it in a separate account to create an emergency fund. Within a couple of years, you will have a considerable corpus of money at your disposal to face the downturns if any.
This is the most significant part of money management for a business startup. You will have to make frequent and decisive changes in your financial policy as per the demand and trend of the market. To cope up with the time you should not have rigid rules to stick to. You must be flexible enough to spend more if the market needs it or save more if that is the demand of the hour.
Take professional help whenever you feel and never work on guess works. Professional financial advisors will help you to get your business finance in order making necessary changes at a time to make your business most profitable. Search for a reliable and experienced accountant who not only knows about business finance management but also about tax requirements.