When you’re running a startup, establishing a solid financial structure can become a challenge. This is especially true when you’re operating on little to almost no funds at all. But when you have gotten past the seeding stage, Series A and B, you will realize that you will have a sizeable amount of cash to use. However, you need to think of this investment money as a resource that dwindles quickly. Not looking after it carefully will result in losing all your money.
Managing startup finances can be quite difficult to understand, especially for newbies who are just testing the waters. But it does not have to be that way, especially that there are now tools and applications that can make things much easier. On top of that, setting the right priorities and goals will keep you from overspending, thus helping you allocate your money to more important business aspects.
If you are looking for some ways to make managing startup finances much easier, here are some of the things you may want to keep in mind:
List your priorities
A lot of startups make the mistake of spending their money on the wrong things. Some develop marketing plans first even before the prototype of their product is made while others focus on making their offices glamorous. Know that you can delay the purchase of that barnwood shiplap for your cottage-like office; instead, put your money in the development of your product and stabilizing the framework of the operations of your business. This may sound old-fashioned but think of managing startup finances like budgeting at home. For example, list down all your priorities and focus on them. It’s like listing down what you need to buy at the grocery; when you do it, you keep yourself from impulse purchases.
Know where your money goes
The money that your investors have given to your business should be well taken care of. A lot of partners and financiers will always want to get detailed reports on where their money has gone. So, make sure that you have a list of activities, invoices and receipts. Having these records will also help you determine if the money spent is in line with what’s written on the business plan. Similarly, keeping these records will show your investors that your business prioritizes transparency. In turn, you will have a chance of building a stronger relationship with them.
Build your finance team
As your startup evolves to a more stable business, you will realize that money-related concerns and activities become much more serious. They also grow in volume, and they become much more demanding. You may find that a huge portion of your time goes to this aspect of the business. You have other core areas to attend to, such as product development and marketing. As such, you may want to build a steady finance team, which is composed of a licensed accountant and an assistant. Having these professionals under your team not only helps you focus on more important matters; they also help you increase the accuracy of your financial statements.
If it’s your goal to make your budget more competitive, you will need to cut corners and use the savings on things that are more urgent and important. For instance, instead of having a dedicated office, you may want to consider working at a co-working space or turn to virtual operations. Leasing a piece of equipment may be more practical, especially if you are using it sparingly.
Manage your money wisely
Money is the lifeline of your startup, so if you want it to keep on thriving, you need to know how to manage it properly and wisely. It can be not easy at the start, but you can always find help from mentors and fellow startup managers.