Handling your startup’s finances might sound like a scary task for a business, which is not an accounting firm. Professionals advise businesses to avoid managing their finances unless they are proficient in the task. Businesses often still try to cope up with budgets, expenses, and revenues on their own to save costs associated with hiring an accounting firm or specialist. Staying on top of the cash flows is highly significant for business as their day to day operations depend on it. Businesses should not worry as tools and tips exist that can help them cater to their financial needs.
Managing startup’s finances
Set up a bookkeeping system
Every business, either new or old, requires an accounting system, which enables them to stay on top of its finances. Therefore, setting up a bookkeeping system must be the priority for all the entrepreneurs looking to mark their name.
Before you come down to selecting an accounting system, you should sit down and brainstorm your key business needs and how the system can cater to them? Monitoring your inventory, managing employee payrolls, accounts payable, and aging invoices and other functions all must combine to form the basis of your bookkeeping system.
Whether you implement an advanced accounting software or are using excel spreadsheets, you need to indulge in thorough research before selecting the right medium according to your needs. Proper management of a startup’s finances depends on your ability to recognize your key business needs and then handling them appropriately.
Institute banking relationship
The basic rule of running a new business refers to the separation of personal and business finances, right from the start. Some of you may make a mistake to operate your business with a personal account. However, that can turn out against you in no time. Filing your yearend taxes could result in an absolute disaster with a combined account. Therefore, your startup’s finances should, at all times, be controlled by a separate business account.
Open up a business checking account and apply for a credit card so that you can start building up your business credit. If you are using accounting software, integrate it with your bank account so that you can handle the invoices and payments in an appropriate time. This can be of huge benefit as you have access to real-time balances in all your accounts as well as being able to make automated payments for situations that are of utmost importance.
Building a solid and healthy relationship with your bank will ensure that your business stays out of any financial distress. Keeping a good history with your bank will make you eligible for loans and funding required for expansion.
Set a budget
A comprehensive budget plan is essential to manage your startup’s finances as it will act as a guideline for you to make key strategic decisions. During the early stages of your business, it can be quite hard to maintain a positive cash flow. However, it should be the ultimate goal of your business. Sitting down and analyzing your revenues and expenses would offer you a clear picture of your current business standing. Identify a breakeven point so that you have a clear picture of where your income and expenses meet. A budget plan with all these details is of great value to the organization.
Setting up a budget also helps you determine your pricing strategy. A fair and competitive pricing strategy if what will set you apart from the competition, and that is only possible once you have your budget right in front of you. All the other needs related to your startup’s finances are listed down in a budget, enhancing its importance.
Don’t forget taxes
Tax season is the most stressful time of the year for any business. Paying taxes as a business owner is different from being a tax-paying individual. You have to account for your invoices, payments, payroll expenses, and other aspects of the business. The IRS will thoroughly audit your business for any discrepancies, so you must prepare your startup’s finances for tax season from the beginning.
Implementation of these guidelines will ensure that your finances are for the tough times ahead.
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