According to research, roughly 550,000 entrepreneurs launch new businesses every month across the United States. If you’re thinking about creating a startup venture, you’ll be swimming in this sea of competitors right out of the gate.
Your product or service may be as innovative as they come. No matter how amazing it is, if you don’t have enough capital to fund day-to-day operations, marketing campaigns, research and development initiatives, and long-term expansion you’re not going to succeed.
You may love the idea of being your own boss, but that also means you bear the responsibility of finding the money needed to keep things afloat.
Today, we’re taking a look at 10 tips that can help you manage your money and grow your bottom line while you find your footing as a business owner.
1. Leverage Accounting Software
Sure, you can keep track of some items on a spreadsheet, but you’re going to need accounting-specific software to get a clear picture of your startup’s financial health.
You don’t need to break the bank at this point but look for a package that includes at least the essential tools you need to gauge your checks and balances, perform billing, complete payroll and the like. Some of the most popular and longstanding software solutions include Quickbooks and Xero, though there are myriad tools available in both online and desktop formats.
Waiting until you have more cash to handle could put you a few paces behind when that time comes. Even if you’re at the leanest point in your journey to entrepreneurship, it’s important to go ahead and get this particular ball rolling.
2. Establish Your Accounts Receivable Process
Before you even accept a single dollar from a customer, you’ll need to have your accounts receivable system in place.
Find one that makes it a cinch to see which invoices are open and which have been closed, as well as all balances. To streamline the process, establish other payment guidelines at this time, as well. These should include, at a minimum, your:
- Credit requirements
- Timeline for collections
- General payment policies
Some of the best-scoring programs for accounts receivable software in the small business and startup sector include Due, Kashoo and FreshBooks. These, and others like them, offer cost-affordable services that can help young companies grow.
Want to encourage brand loyalty and incentivize new customers? Consider allowing a discount for those who pay early and include it in your general terms. At the same time, you’ll need a plan in place for those customers who continuously show up with late payments, as well.
3. Setup Your Accounts Payable System
In the same vein of your accounts receivable process, you’ll also need a system in place to handle your outgoing payments.
You’ll need to ensure that you have an optimal cash flow, especially during the beginning period. To this end, it’s helpful to list out every expense you anticipate incurring.
How will you keep track of these? What money will you pull from to cover them? You’ll have your pick from a bevy of software solutions designed to help you answer these questions. The same one that you choose for accounts receivable can help you manage your payable side as well.
It’s in your best interest to partner with a financial expert at this point to help you make the right decision. They can walk you through the options to help you select the one that’s best suited for your specific needs.
4. Make a Budget
It’s not only excellent business startup advice, whether you’re staring a financial company or a special screenprinting one. It’s also the foundation of any successful personal finance routine. A budget gives you control over your spending and can help you rein back any unnecessary costs.
It doesn’t have to be rocket science, and it doesn’t need to be too complicated. Simply add up your business expenses and subtract them from the income your startup earns. As you grow, this might take some time and look more nuanced, but the basic concept remains the same.
Most accounting software packages will include budgeting resources, but if your startup is small enough, you can also look to personal finance budgeting apps to help you track your spending and earning. Online solutions such as Mint and Wave are intuitive and user-friendly ways to monitor your finances.
Have you set milestones for your business? That’s a great step, but you’ll need to make sure you have the funding in place to achieve them, as well as the resources. A budget can help you see if you’re on track to get there, or if you need to make any adjustments.
Once you cross a goal off your list, revisit this budget to make sure you’re still on track. At this point, you may also consider vendor financing, and you’ll likely be looking at ramping up a sales and marketing campaign.
While these can be rewarding pursuits, ensure you aren’t spending a majority of your working capital on ineffective promotional materials. Opt for ones in the digital sphere that can reach as many people as possible without stretching your figures too thin.
5. Forecast Your Financial Future
Launching a startup that makes it past the first year requires keeping one eye on the future. That’s where financial forecasting comes in.
Using the data you have in front of you from your budget and sales analytics reports, begin by estimating what each department in your company will spend over the next three years or so.
From marketing and IT to HR and warehouse, you should take into account the needs of each team and the resources they will require down the road. Don’t forget to include any ongoing professional services that you pay for, such as renting your office space, hiring a snack machine vendor, and receiving lawn care services.
Your accounting software, including QuickBooks, should have a forecasting feature included. There are also other systems dedicated entirely to cash flow projecting and forecasting, including Float, which integrates seamlessly with your QuickBooks platform.
Make a plan to hold monthly review meetings to see if these projections are holding true or if there will need to be any adjustments made. You may also need to revisit the numbers if your business plan changes or you make significant alterations to your company structure.
6. Pick Your Bank
When it comes to finding a bank that is best suited to support an entrepreneur startup, you’ll quickly realize that one size does not fit all. In fact, you might need to comparison shop for a while to find one that you’re ultimately comfortable doing business with.
One element to look for? Opt for a bank that allows you to come in for an in-person consultation or business startup advice.
While it’s convenient that most financial institutions offer access to 24/7 online support, the people behind the screen might not understand your individual banking needs. Conversely, if you can establish an in-person relationship with your local teller, you can expect a more personalized level of service.
When possible, seek out one that has experience working with startup entrepreneurs and is well-versed on flexible lending opportunities and associated programs that can make it easier on you as a new business owner.
As you set up your separate business and personal accounts, remember to ask questions if you need to and make sure the banking team is one you feel comfortable coming to with any concerns, issues or inquiries down the road. You’ll be working closely with your bank from here on, so it’s essential you choose the right one now.
7. Follow the Model of Lean Hiring
It might be tempting to go out and hire the best of the best to staff your desks and fill your office space. However, before you spend money on recruitment and retainment, consider opting for a more lean hiring model instead.
In short, this means hiring only for the positions you truly need, not those you hope to have someday. Where possible, seek out contracted employees and freelancers to help offset some of the costs of managing a full-time employee.
This model stemmed from the idea of lean manufacturing, wherein managers aim to make warehouse production as efficient, wasteless and affordable as possible.
As your business grows and you can grow your in-house team, you can reexamine this model. For now, however, look for employees who don’t mind a more flexible schedule that allows them some creative oversight. As you begin to hire, make sure your policies, regulations, and terms are clearly outlined in the onboarding documentation. You should also seek to make the actual recruitment process as straightforward and timely as you can.
A few ways you can make your recruitment process leaner include:
- Narrow down your candidate search platforms to a select few that cater to your industry
- Embrace applicant tracking tools to automate a portion of the process
- Focus your efforts on results-producing tasks, such as interviews
While you’re still building your capital, look into ways to reward employee performance that aren’t necessarily cash-based. From time off to a certificate of appreciation, how elaborate you choose to go is up to you.
8. Hire a Tax Expert
When you’re pinching every penny, you might think you can save money by doing your taxes on your own. This may especially be the case when you’re still getting your feet off the ground and haven’t earned any real income yet.
Still, now is the best time to contact a tax professional who can walk you through every step of filing your taxes as a business owner. In addition to the obligations you’ll have on the federal and stateside, you may need to factor in payroll taxes, 1099 forms, and sales taxes as well.
The tax jargon can be overwhelming, the mistakes can be easy to make, and the paperwork can be complicated, so it’s well worth partnering up with someone who’s been there before and can simplify it all for you.
Make sure you find someone who is experienced working with independent business owners, preferably in your industry niche. That way, they’ll know how to navigate every part of the process and can find ways to help you save wherever possible.
While you’re vetting your options, take a look at the startup business tax tips provided by Intuit. They’ll give you an idea of what’s expected of you. Here, you’ll also find helpful tools including a free tax calculator.
9. Find a Payroll Provider
If you’re at a place in your startup journey where you are hiring employees, you’ll need to find a payroll provider that you can count on. As with a banking institution, you’ll need to do some vetting here. You might not need a full-fledged payroll package if it’s just you and a seasonal freelancer.
Keeping this in mind, visit a few and talk about your options. You can narrow them down based on what kind of compensation and benefits package you’re able to offer your team, as well. At the very least, your plan should account for worker’s compensation insurance and any payroll taxes you’ll incur throughout the year.
An alternative is to look online for a payroll solution. Apps such as Gusto take care of all of the legwork for you, streamlining your payroll requirements alongside your tax and benefits processes. New hires are reported to the government, worker’s compensation is deducted, and digital pay stubs are submitted, among other tasks this handy tool is capable of.
10. Look into Other Sources of Funding
While there are plenty of resources available to help you find and then mine through external funding opportunities, determine if that’s a route you want to pursue. If possible, bootstrapping and adopting a lean business model can help you conserve resources and start small without having to go this route.
If you do decide that outside funding is required to get your startup off the ground, don’t just take the first offer that comes along. Instead, create a funding plan and a method to vet opportunities as they come. This can be an especially fruitful way to help you boost your growth if it’s stalling or if you need acceleration.
Today, there are even mobile apps you can download to help you find and filter through funding sources. Some of the most promising include ah! Ventures, Grex and Let’s Venture.
Sometimes, reaching out to friends and family members first can be an ideal way to go, as venture capital is far from your only option. Don’t be afraid to take your time with this step, as most new startup owners rush into it to secure early funding.
Resources Every Startup Entrepreneur Needs
As a startup entrepreneur, you stay busy. You’re managing daily tasks, forming partner relationships, overseeing employee responsibilities and trying to keep on top of that avalanche of emails.
You might not have time to find the best business news, resources, and information that’s out there in the digital sphere.
Thankfully, we do.
We’ve created articles covering everything from technology updates to finance trends and bring them to you to help you stay on top of your entrepreneurial game. Whether you’re interested in loan information, payroll setup, marketing advice or a slew of other topics, if it will help your business and build your brand, you’ll find it here.