Often, in the excitement of launching a start-up, financial affairs are placed on the backburner – or completely forgotten about. You could get away with this for a period of time, but inevitably every business has to start planning its financial affairs. The sooner that this process starts, the smoother it will be. In addition, good financial planning will support the bottom line profitability of your start-up.
Plan your cash flow
As with any business, by far the most important aspect of managing finances in your start-up is successfully managing your cash flow. There is often a time delay between the need to pay outgoing expenses, such as salaries and raw materials, and the ability to receive money for the products and services that you are selling. It is not an uncommon problem, and cash flow issues have caused many start-ups and, indeed, very large business to fail.
The key to managing cash flow is to plan carefully. You may find that you are able to get overdraft agreements and loans at an early stage already, but these often can’t be acquired by the time that you are in an acute cash flow crisis. Also, you may often find that customers are willing to pay in part up front to help your business meet cash flow requirements.
Tracking and collecting payments due
Getting customers to pay is not always as easy as it sounds. Your start-up needs to be equipped with the necessary processes that notify customers that they have a payment due – and that notify them if they are overdue with any payments. Automating this process is ideal – starting with invoicing. For example, by making using of https://invoicehome.com/ and an invoice template, UK companies can make sure that customers are kept informed of the amount they have outstanding for any purchases they have made.
A robust debt collecting process should be in place in your start-up from the very beginning. The longer that outstanding amounts are left uncollected, the harder they are to collect. At the initial stages of your business, you will need every spare bit of cash that you can get, so running the risk of not collecting any outstanding amounts is not one you should take.
Focus on good accounting practices
Every business must file accounts with government authorities, and those accounts will also come in useful when you are looking for investment, or looking to sell your business. Keeping records from day one is extremely important in this regard, as information that is not recorded can be irretrievably lost. Ideally, your start-up should make use of accounting software from the very start, though safely keeping any emails or printed documentation will also help.
You may want to consider employing qualified professionals for accounting purposes early on – an expert accountant will be able to help you set up your business so that you are operating in the most tax-efficient way while also making sure that you keep to all of the important financial regulations.
The benefits of using technology
The latest technology has made it a lot easier for start-up businesses to handle their accounting affairs. Entire accounting systems are now made accessible on the internet and are available on a monthly subscription basis, so you don’t have to be concerned about large initial cost outlays. These systems are also often directly linked to tax systems and to payment systems, taking away a lot of the manual legwork previously involved in managing the accounting affairs of a business.
Electronic payments have expanded dramatically in the small business arena. With many consumers expecting to navigate life on a cash-free basis, you need to make sure that you can take credit card and online payments where appropriate. Recent regulation has significantly reduced the cost of accepting electronic payment methods, and you could find it is cheaper to process in the long run than the cash equivalents would be.
Maximising your revenue
In the excitement of launching your business, it is easy to forget one important factor: businesses exist to generate revenue for their owners and investors. Taking early steps to maximise your incoming revenue is very important in managing the finances of your start-up. You can push for higher levels of revenue in various ways, including extensive marketing and awareness building.
The flipside of maximising your revenue is cost control. It is common for costs to spiral out of control in a business, meaning that you are spending money on outgoings that are not really contributing to the success of the business. This often happens due to a lack of monitoring, which is an issue that crops up with start-ups, especially at the initial stage.