Startups are enjoying something of a resurgence in recent months, thanks in no small part to the major shakeups catalysed by the COVID-19 pandemic. Of course, there are dozens of challenges facing UK startups right now, many of which have been exacerbated by the uncertainty of the last two years. But for those just getting the ball rolling, financial issues are always going to be of paramount concern.
From audits and tax to managing revenues of growth and tracking incomings and outgoings, there’s a lot of plates to keep spinning. But while working with an expert in the financial sectors such as RSM Global will certainly help provide financial services and risk consultancy for most market sectors, it’s also a good idea for all startup owners to have a vague idea of what managing finances as a startup actually means.
Tracking and managing your startup finances
The first five years are always going to be the most crucial for any business. While growing pains are to be expected and lots of learning and adapting will also need to take place, mismanaged finances are what sink most fledgling businesses. So, here are 5 tips to ensure that doesn’t happen to your startup.
Forecast – Develop a strong financial plan that maps out exactly how much of your revenue you expect to be spending on expenses, development and building the business. How much you dedicate to each will depend on your sector and how quickly you want to grow but it’s important to have those numbers in writing ASAP.
Remain realistic – There’s nothing wrong with showing a little ambition early on but don’t let that ambition cloud your judgement. Be rational and realistic with your financial decisions. So many startups fail because they spend too much too soon on the wrong things.
Study the cash flow – While studying your cash flow used to mean making detailed notes of all receipts and invoices and logging them manually into a spreadsheet, modern accounting software removes that burden almost entirely. Use this software to track your cash flow and figure out where you’re spending too much and where you’re not spending enough.
Adjust and manage – Always ensure you have enough cash to last at least 6 months but if you have anything more than that, don’t be afraid to experiment and make adjustments to regulate your cash flow. This can mean anything from negotiating payment terms with suppliers to chaining up how your inventory system works.
Review regularly – Reports are an incredibly valuable tool. Use your accounting software you reveal everything from profit and loss reports to depreciation reports and don’t take your eye off your payroll either!
Follow these tips and you should have a successful startup on your hands that can make it comfortably past the first few difficult years and become a self-sustaining business.