Starting a new business venture requires a lot of vigilance – from ensuring customer satisfaction to seeking the highest quality in products or services. One area that needs even more attention, though, is financial health. All of the great ideas in the world can’t keep a new business afloat if the cash dries up. If your primary area of expertise is not in money management, then take a look at these accounting tips for startups:
1. Give Payment Incentives
Mark up your goods and services to allow for a discount for people who pay early, set up automatic withdrawals, or opt for a subscription plan. When people feel like they are getting more for their money, they’ll up what they are willing to spend. It also boosts consumer loyalty when buyers feel that they are being rewarded for continued use of your products or services.
2. Use Accounting Software
Logging in to your bank account every few days and writing checks blindly isn’t a smart way to manage money as an individual – and it’s an even worse idea for startups. In order to make smart money decisions for your business in both the short and long term, you must have a good handle on where you stand financially at all times. The best way to ensure this is through thorough, accurate and intuitive accounting software. Using cloud-based accounting software will make it even easier to access your financial details from anywhere.
3. Have Cash on Hand
Don’t wait for the proverbial rainy day to storm on your startup. Create a plan to build up your cash reserve as a savings mechanism. Financial analysts suggest having at least 3 months’ operating expenses on hand at all times but getting closer to 6 months is even better. Look ahead to the cash you plan to spend in the next 2 years and see if the cash you have reserved could get you through several months if needed. If not, then it’s time to start socking even more of it away.
4. Let Someone Else Handle Finances
It’s a conflict of interest for startup owners to take on all the financial details too. It’s just not possible to think with a clear head when it comes to spending and saving when you have so much of your emotions invested. Hire a contract money manager or a local accounting firm and pass off the task of the day-to-day and big-picture money management. These experts will also know more tricks for saving you money and can warn you when a potential financial hurdle is approaching.
5. Create, and Stick with, a Budget
Don’t spend a cent until it’s been decided upon. In other words, know exactly where you want all of your money to go and then allocate it accordingly. There will be times when something arises that was not considered in the budget; reserve that spending for true unexpected situations or emergencies, though.
6. Consider Financing over Suffering
Borrowing money is not a sign of weakness – it’s actually an empowering thing to do when it makes sense. Avoid the potential startup burnout that comes with trying to raise too much cash too fast. Don’t skip paying employees, or yourself, because you don’t have the money on hand. You should also not put off major growth opportunities because you want to raise the money first. Seek out smart financing options – from traditional bank loans to crowdfunding – so you don’t have to wait on incoming cash.
Startup owners carry the weight of their businesses on their shoulders and though there is a lot to keep an eye on, financial health is king. Use smart accounting tactics and get outside help so you can navigate the early days of your business with success.
Read More: What’s Your Startup Actually Worth?