Financial startup basics are fundamentals that startups must have a firm grasp of to ensure financial health and secure the funding needed to grow. Nine out of ten failures in startups are caused by insufficient knowledge of these vital elements. The reason is simple: cash flow. Without a clear understanding of how to track and forecast cash flow, a start-up cannot manage its budget or invest in growth.
Key startup accounting records like income statements (revenue and expenses) and financial projections are crucial to demonstrate the viability of your business model to investors. These models need to be carefully calculated in order to accurately reflect your business’s economics. This includes easy-to-forget expenses like shipping, taxes and the cost of insurance, payment processing fees and utility costs.
If traditional lenders aren’t a viable option family members and friends can offer financing to startups in the early stages. However, in this scenario, it’s important to put the terms of any loan in writing to ensure that there aren’t any conflicts over repayment obligations or expectations for future performance.
Startups may also look for venture capital from an individual investor or crowdfunding platforms like Kickstarter. However, these kinds of financing typically require a written business plan that includes a comprehensive financial model. Creating a model allows you to understand your company’s finances, allowing you to https://startuphand.org/2023/04/30/the-different-stages-of-funding-in-venture-capital/ make informed choices about the amount of capital you require and what strategic goals you want to meet by next year.