Financial startup basics are the fundamentals that startups must know to ensure financial health and secure the funds needed to expand. Nine out of ten failures in startups are the result board room of an absence of these basic elements. Cash flow is one of the reasons. Startups that don’t know how to monitor and forecast cash flow will not be able to manage its budget, or invest in growth.
Investors must be aware of your startup’s financial projections and income statements. These models have to be calculated carefully to accurately reflect your business’s economics. This includes easily overlooked costs like shipping, taxes and insurance, processing fees for payments and utilities.
In the beginning startups may be able to get financing from family and friends, if traditional lenders aren’t an alternative. However, in this situation it is essential to put the terms of any loan in writing so that there aren’t any disagreements regarding repayment obligations or expectations for future performance.
Startups can also seek out venture capital from an investor from the private sector or crowdfunding platforms such as Kickstarter. However, these types of financing often require the creation of a business plan in writing which includes a thorough financial model. Making a model helps you to gain an understanding of the financials of your business, allowing you to make educated decisions about the amount of capital you require and what strategic goals you’d like to achieve by the time next year rolls around.
