s a startup, there are all kinds of things that can impact your success. One thing you need to make sure you stay on top of, is your finances. Knowing what to do and what not to do with your finances will help you to keep your business going even when business is slow. Read on for 14 things you should not be doing with your finances as a startup.
1. Leaving your finances In danger Of human error
Human error can be one of the biggest issues when it comes to handling your finances. You’ll have money coming in from all directions, so being able to track this effectively is a must. Accounting software can be a cost-effective way to ensure you keep track of everything without paying more than you need to.
This will massively help with cash flow management, and make it easier when it’s time to do your taxes. You can look at hiring a professional when things get a little more complicated. Business intelligence software is another piece of software that can help you with your finances. Using this software you are able to analyze both estimates with actual figures or compare budgets with forecasts. Don’t leave important things like this down to a person who can get it wrong!
2. Running up your expenses
Keeping your expenses low is the key to longevity, especially at the beginning of starting your business. Think about it: you don’t need to hire a huge office in the capital or hire a chef for all of your staff members right away. You might want to be the next Google or Facebook, but you’re certainly not there yet.
Remain patient and frugal. Operate think and you will be able to allocate the majority of your capital to growing the business. In the future, you’ll be able to implement all kinds of perks, but not right now. Make sure you don’t focus your energy on the wrong things like so many other businesses do.
3. Wasting time
You’ve probably heard the phrase ‘time is money’ – well, it’s true. Your time is valuable, and there are few things that have quite as much monetary value. You only get so many hours in a day, so take that into account as you plan your schedule. If you or your employees are wasting time on things that are unimportant or even unrelated to your business, money is going down the drain.
4. Forgetting to pay yourself enough to live
You’re working hard and you want to grow your business as quickly as you can, but you need to make sure you have enough to buy the essentials. Paying yourself is key. Of course, it’s not a good idea to pay yourself a huge wedge in the beginning, but you should know how much you need to live and pay yourself. Make sure you can live fairly comfortably while growing your business. Eliminating personal financial stress will help you to focus on growing your business.
5. Failing to set financial goals
You can’t be vague when it comes to your financial goals. Vague goals get vague results. Break down your financial goals into measurable goals that you can actually reach. Set them monthly/weekly. Make adjustments as you need to so you can continue to grow. Having smaller goals can help to keep up the momentum, while larger goals will help you to stay focused on what’s most important. Get as specific as you can when it comes to your goals.
6. Using expensive credit
Optimum use of your funds is key to your success. Credit can play a critical role in growing your business, but you certainly don’t want to rely on it to get to where you need to be. Having a business credit card is the norm, but make sure you hunt around to find the best deal for you – and then only use it if you really need to. Before using credit on other aspects of your business, think carefully and weigh up the pros and cons.
7. Mixing personal and business finances
Opening a commercial bank account is important – you don’t want to end up mixing your personal and business finances. These accounts should be kept separate at all costs. This will provide you more straightforward accounting at the end of the financial year for tax purposes, even if somebody else is doing it all for you.
8. Having the wrong insurance (Or none at all)
As a business owner, insurance is something that you need. It’s something most entrepreneurs hate paying for, but it will protect you, your business, your staff, and any customers that visit your business. Research what level of cover you will need for your business to make sure you end up with the right level of cover. A business that deals directly with the public will need a different kind of insurance to a business that deals solely online.
9. Being slow to invest in technology
More business owners need to understand technology these days – those who don’t could pose a risk to their own business. You might have a chief technical officer on board, but that doesn’t mean you shouldn’t know the basics. Having a good idea of the ins and outs will allow you to make better decisions, and you’ll know what’s worth investing your money in and what isn’t. This doesn’t just refer to accounting software and business intelligence software as mentioned earlier, but other kinds of software too, like other kinds of automation software.
10. Failing to look at data regarding your finances
It really doesn’t matter how small your company is. You are required to have your payment terms outlined and efficiently in order to manage your small business finances. Taking into account the legal and financial side of your monetary transactions and tracing all of the movements in your capital is important. Studying this data will also help you to develop a reasonable budget and track your progress to see if you fit within its limits.
11. Confirming a contract before negotiating with vendors
Negotiating with vendors before you sign a contract could help you to get a good bargain. Bear in mind that all of the successful negotiators out there know before they begin negotiating what they want to achieve during the negotiation. This might not be negotiating money off, but instead extra payment time, or another feature that would benefit your startup in some way.
12. Not having an emergency fund in place
Designing an emergency fund for the success of your business is also a good idea. While you can have a business credit card, we mentioned earlier that this isn’t something you should rely on or use all of the time. You’re not going to make a consistent amount of money each month – that’s just not how businesses work.
You need to be prepared with some offseason emergency funds so you don’t have to worry too much about your income. The last thing you want is being unable to pay a vendor or a member of staff because you’re short. Having money put to the side will ensure you’re protected, whatever happens.
13. Buying business equipment outright instead of leasing
Rather than buying business equipment outright in the beginning, it’s often a better idea to lease the equipment. The saved investments can be utilized in other areas to make the business more productive. This is an especially good idea if there’s a piece of equipment you will only be using on a case by case basis, or if you’re not sure you’ll use it enough to buy. If you know that you need to own a piece of equipment, consider buying second hand.
14. Getting further and further into debt
Debt reduction should be a priority for any business owner. If it isn’t, you will find that you damage your credit rating – not to mention your peace of mind! Carrying bad debts forward year after year will do more harm than good, so figuring out a plan to pay everything off now will help. A healthy financial position will need to be presented to potential stakeholders, so bear this in mind.
In conclusion: Your startup and your finances
Running your own startup is an amazing venture that hopefully brings a lot of success in the future, but first you need to know how to overcome challenges that will inevitably present themselves. Your business productivity and success largely comes down to being able to manage the company finances effectively. Keeping the above in mind as you grow your business will help you to make sure this happens.
The more attention you pay to your cash flow and business finances, the better prepared you will feel to make good money management decisions.