“Are you an owner of a start-up company? Want to manage your finances like a pro? Read this blog to know more.”
Are you a business owner of a startup company? Is your credit card bill rising day by day? Don’t worry because you are not alone. Most of us are not very good in managing our finances. It is really frustrating to see that in spite of well lay out plans and precautions, the calculation does not work out at the end of the month leaving no space for buffer. The result of poor financial planning can have a negative impact on your business and if this happens for a couple of times, you might consider wrapping up the entire set up.
Thus it is very important to organize your company’s financial matters during its early stages because it goes without saying that cash is the lifeline of your business. The key is to know how much money is running through your business and laying out financial plans accordingly. Go through this blog to know some of the most common financial mistakes that startups make and how you can avoid them.
1.Not analyzing business expenses
As an entrepreneur, you must have taken many business decisions based on sheer instinct or gut feeling. Though it is true for many aspects in business, it is not true for finances. Don’t assume anything. One of the common mistake business owners do is to believe that everything is under control just because the revenue looks good. But what about cash flow? It is very important for startups to track revenue against expenses because, in the initial stages where there is barely any profit, it is essential to track the expenses to save you from untold financial hazards in the future.
2. Adding to fixed costs
Casually adding to fixed cost can be the reason for the downfall of many businesses. Though it might not seem too much, fixed costs can add up to the huge amount of expenses. For instance, a hire made too quickly or too big office in a posh locality of the town, a flashy company car, designer office furniture etc can add to the long list of fixed costs. Unfortunately, many companies realize at a later point that they have too high fixed monthly costs. So the key point is to review something and make a call on whether to add it to fixed costs or not.
3. Not taking necessary actions during crisis
Sometimes despite your honest efforts at running the business, things go wrong. This might happen due to loss of a client or missing out a good deal or an economic downfall. If your startup company encounters any such unfortunate event, don’t make the mistake of letting things as it is and waiting for the situation to get better. It is the difference between reacting to the crisis and delaying the inevitable that ensures the safety of your company. So, don’t sit tight hoping that situation will favor you, instead review the situation with cool head taking a hard look at the numbers. Take a while to see how things are shaping out. If it is still not in your favor, start the cost cutting process like downsizing your office, getting rid of the office car or laying off staff. Taking these steps at the initial stages will keep your business healthy during hard times. Waiting for things to get over will slowly sink you into debt and lead you towards bankruptcy.
While I am here to guide you to avoid some common financial mistakes, always remember that when it comes to setting startup finances, your exceptional diligence is absolutely required.