Start Up Tips

Startup Tips: Financial Help for New Entrepreneurs

More than 600,000 new businesses open their doors each year. At the same time, almost 600,000 existing businesses shutter operations annually.

One of the leading causes of business failure is cash flow issues. Business owners may not be able to access the funds they need to keep their doors open.

If you’re looking to get a business off the ground, you may be wondering how you can avoid this fate. These financial startup tips will help you keep the cash flowing for your business.

Record Keeping Tops the List of Startup Tips

The very first thing you should do is establish a simple accounting system. You want to keep track of your ins and outs, as well as bills you need to pay and your clients’ outstanding invoices.

You don’t need to be a trained accountant to keep a ledger. A simple system can also help you keep track of finances, even when you get busy. You may want to invest in accounting software to help you manage.

If you do find yourself falling behind or getting confused, don’t be afraid to ask for help. A good bookkeeper or accountant can help you keep things straight.

Keeping your books in good order gives you a better picture of the business’s financial health. In turn, you can make better decisions about expenditures.

Separate Business and Personal Expenses

Business finance for dummies would tell you to separate business and personal expenses. This is always a good idea.

Many entrepreneurs run small, home-based businesses. You may not see much difference between business expenses and your personal finances.

If you buy groceries on your business credit card or office supplies using your personal savings, you make it difficult to track spending.

Drawing a hard line between your personal and business expenditures and income helps. This is particularly helpful at tax time. It’s also important if the business is ever audited.

It can also present you with a clearer picture of the business’s financial health. If you’re running into the red, check to make sure you’re not running up your tabs with personal expenses. Also, be sure you’re not trying to write-off personal expenses.

There’s nothing wrong with putting a bit of personal funding into the business as an investment. Be sure to keep track of these investments though, and you’ll be in a much stronger position.

Keep Expenses Low

Another solid piece of business startup advice is to keep your expenses low at the outset. If you’re not sure what your income will look like, you don’t want to be on the hook for thousands of dollars every month.

Many businesses can be started with little capital. If you want to start an online eCommerce business, you’ll need to invest in a website, payment processing, and advertising. You’ll also need funds for shipping and packaging.

You will have to invest in your inventory as well. You don’t need to have a hundred units of every item you sell in-stock at all times.

You may not need to invest in a custom-designed website or a customer service solution either. These things can be added as the business grows.

Be strategic about how and where you spend your money, and you’ll set yourself up for success.

Create Financial Projections and Establish Goals

The key to cash flow is often creating projections. If you know how much cash is coming in versus how much is going out, you can make better financial decisions.

Many business owners have to focus on which bills to pay and which expenses to cut. This is especially true in the early days of the business. This is because cash flow can be unpredictable and uneven.

Having a good cash flow projection can tell you where you’ll be short. You can then take measures to make up the deficit, such as scaling back or taking out a short-term loan.

Cash flow projections can also show you when you’ll have surpluses. You can earmark extra funds to make extra payments on loans or to fund new initiatives.

You should also establish goals to work toward. How much do you want to bring in each month? How many new customers do you want to get or how many sales do you want to close?

Revenue goals are the most common financial goals for businesses to set. A cash flow projection also shows your progress toward those goals. Business growth is often about growing revenue.

Keep in mind that gross revenue is how much money the business brings in. Net revenue is how much money the business has left after all your obligations are paid. This is also known as profit.

Assign Your Time a Value

When entrepreneurs startup, they should remember the old adage “time is money.” Your time is valuable, and you should pay yourself for every second you spend on the clock.

This can sometimes be difficult to do, especially right at first. You may not have the income to pay yourself a salary. This is another place where your personal and business finances can end up blending.

Keep track of your time, though, and pay yourself as you’re able. Many entrepreneurs say their businesses are a labor of love. That doesn’t mean you shouldn’t get paid for your time and skills.

Assigning a monetary value to your time also encourages you to manage it more efficiently. If the business has to pay you while you’re on the clock, make sure every minute counts. Look for ways to improve your productivity and efficiency.

If you find some tasks are eating up your valuable time, you may be better off outsourcing them. Outsourcing isn’t an option for big businesses alone anymore. Plenty of small businesses and startups outsource some of their functions.

Sending time-intensive tasks to someone else frees up your time. You can devote yourself to the things you’re good at. In turn, you improve the business’s productivity and efficiency.

Find the Right Financing

Among the many things to know about finance is where to get funding for your business. Many business owners start with funding from their own personal savings. If they need more, they may try to apply for a traditional loan.

Keep in mind there are many other financing options out there. A microloan might be right if you’re looking for a small injection of cash. A short-term loan or a working capital loan could give you the funds to manage costs in the business.

Some other funding options you should consider include:

  • A line of credit
  • Business credit cards
  • Equipment loans
  • Crowdfunding
  • Peer-to-peer funding
  • Business grants
  • Invoice factoring

You may even ask friends or family to loan you some money.

As you can see, there’s no shortage of options for entrepreneurship financing. If you’re short on cash but can’t qualify for a traditional business loan, look at alternative lending.

You can also use personal loans to fund your business operations. You still want to separate personal finances from business as much as possible.

Review Finances on a Regular Basis

As a busy entrepreneur, you may not have time to sit down with your books on a regular basis. Nonetheless, you should make an effort to check in every so often to see how you’re doing.

If you have to complete payroll or pay invoices, this could be a good time to review the books. If you hand these tasks off to a bookkeeper, be sure you make time to check in with them on a regular basis.

Why is it important to stay updated on the books? It gives you the most current financial information. Having an up-to-date picture of finances can help you make the right choices for your business.

If accounts receivable have been falling, you might want to drum up some new business. Does it make sense to spend on an advertising campaign? Should you be scaling back your marketing expenses?

If you never look at the books, it’s hard to know the answer. By reviewing your finances often, you can streamline your expenditures and revise revenue goals. This will help your business grow.

Grow a Financing Network

As a business owner, it’s likely that you’ll need funding again in the future. Every business encounters rough patches. Even if you grow a successful business, you might need funding to grow again.

It’s a wise idea to cultivate a network of financial backers for your business. Your network can include lenders, service providers, and consultants.

These people will help you find and secure the funds you need to keep growing.

Start Off on the Right Foot

If you’re set to open a business or daydreaming about starting one, these startup tips can make things easier. With the right approach to financing, you can grow a successful business.

Are you interested in learning more about your entrepreneurship financing options? Take a look at our blog for more informative articles.