7 Financial Guidelines for Startups


As a startup business one of the areas you have to focus on is finances. Even with a wonderful product and great employees, your business can fail if you make poor financial decisions. Many startup businesses are created because of great ideas and innovative products. Many of these products and ideas are lost because of poor financial choices.

To keep your startup afloat, there are some financial rules you must follow. You cannot survive on a good idea alone.  A business must have a solid financial foundation to be successful. Follow these guidelines to ensure financial and overall success with your business.

Obtain Sufficient Capital

New businesses often underestimate the investments they will need to reach profitability. Underestimating expenses is a very common mistake made in early stages of business. In your financial report, it is a good idea to overestimate capital needed by 10% so you don’t run into problems caused by having no money.

Set a Budget

Setting a budget is imperative. There are many websites that can help you keep track of your budget. These websites are very helpful because there are often many expenses new businesses overlook. A budget is a great tool to help you prioritize expenditures and monitor cash flow. Once you set a budget, be sure to stick to it.

Monitor Cash Flow

This is the lifeblood of the company. Cash flow is the movement of money into or out of your business. Understanding cash flow can provide you with information regarding where your business stands. Cash flow can help you evaluate risks, determine problems with liquidity and calculate your business’s value.

Stay on Top of Your Bookkeeping

When a business is new, you are often in a very busy mode. Receipts and other purchases you intend to input into your bookkeeping system sometimes get overlooked. Do not postpone recording expenditures. You need to do this on a daily basis. If you are backed up on bookkeeping, you do not truly know the financial status of the business. Stay up-to-date.

Follow Through with Accounts Receivable/Accounts Payable

A business cannot be successful without managing money in and out. AR is money owed to the business for goods or services. Keep in mind the time frame you offer customers to ensure you have money to pay monthly bills and suppliers.

Accounts Payable is money owed by the business to its’ suppliers. Make sure you consider the number of days you have for accounts payable when determining the number of days you offer customers for accounts payable.

Invest in a Good Accounting System

It is smart to invest in accounting software to keep your finances organized and accurate. There are multiple softwares available, but QuickBooks is one that is used frequently. This keeps track of money in and out. It keeps track of invoices, paid and unpaid. It keeps track of accounts payable and accounts receivable. Accounting software that can keep all financial activity in once place can keep you aware of the company’s financial health.

Don’t Waste Money

This advice may seem like a no-brainer, but wasting money happens a lot in startups. Don’t spend money on ridiculously expensive furniture for your office. Don’t take your employees out to lunch 4 times a week. Spend the money you do have on things that will benefit the business and encourage its’ success. Also, be sure you aren’t wasting money on employees. It may be a little harsh, but you must be sure those you are employing are being paid appropriately and are truly contributing to the company.

Author bio: Written by Preston Smithson — writer for AccountingMatters.com.

1 comment

Add yours
  1. christian

    Set a Budget
    Setting a budget is imperative. There are many websites that can help you keep track of your budget.
    Which ones, any link?

Leave a Reply