You may have all the required ingredients to form a successful business – an entrepreneurial flair and passion, unparalleled knowledge of your business sector, the best product in the market… however unless you can manage your company finances with a laser focus you will always be on the back foot.
Nobody will ever tell you that creating a startup will be easy, however applying some of the simple steps below will mean you are positioned very well to tackle the highs and lows of business.
- Separate your own bank account from your business one. It is very easy to confuse your personal and business expenditure if the transactions move through the same account. In order to keep it simple and easy for sorting out your taxes when the time comes, it is a good idea to open a business account.
- Organisation. Whilst this may sound obvious, it is very important that start as you mean to go on. Make sure you allocate and organise your company expenses from day one and do not let this practice slide.
- Understand bookkeeping. Historically it was common best practice to simply create an Excel spreadsheet, allocate expenses into categories and then reconcile this monthly against your company bank statement. However, this method is sensitive to mistakes and is considered a little old school nowadays. There are a now a lot of cloud software providers in the market, e.g. Quickbooks or Xero, which were created to simplify this process. And if you are one of many people who do not feel comfortable with numbers, consider hiring a qualified bookkeeper who can take this pressure off you and allow you to concentrate on your passion and what you do best, growing your business.
- Creating a budget and business plan. It is very important to plan ahead and monitor your finances. When you create a budget and stick to it, it will be far easier to identify where you can cut costs (e.g. renegotiating with a key supplier) or areas where you may need to increase your focus to drive revenue (e.g. a neglected marketing budget). A focussed business plan will allow you to make better decisions and survive challenging times. Again, you can always seek help with creating a business plan from a professional.
- Keep emergency savings. It is common knowledge that the first couple of years for any business is the most trying, with many successful businesses not returning a profit in the early months and years. This, plus the inevitability of unexpected challenges, means that it is strongly advisable to have some emergency funds and capital if possible. This will reduce stress levels and avoid seeking additional loans with potentially higher rates of interest.
There are no golden rules to running a startup, however adopting some of the above suggestions will provide a solid foundation for success.
If you need our help with financial planning, then please contact us.