Basics of financial start-ups are essential that startups must be aware of to ensure their financial health and obtain the funds they need for growth. Nine out of ten startup failures are caused by the absence of these fundamentals. Cash flow is the reason. Without a grasp of how to monitor and forecast cash flow, startups will be unable to manage its budget or invest in growth.
Important startup accounting records such as income statements (revenue and expenses) and financial projections are necessary to prove the viability of your business plan to investors. These models need to be carefully designed to accurately portray the true economics of your company which includes cost that are easy to overlook such as taxes, shipping, insurance, payment processing charges, and utility costs.
In the beginning, startups can obtain financing from family and friends if traditional lenders are not an option. In this instance however, it’s essential to have all loan conditions written down to avoid conflicts over repayment obligations or future performance expectations.
Startups can also seek venture capital from private investors or crowdfunding platforms such as Kickstarter. However, these types of financing often require an outline of the business plan which includes a thorough financial model. You can gain a better understanding of the financial situation of your business by creating the model. This will allow you to make educated decisions about the amount of capital to invest and what strategic goals to accomplish in the coming year.
