Fundamentals of financial startup are the ones that every startup must know to ensure their financial health and get the funding they need for growth. Nine out of ten failures in startups are the result of an absence of these basic elements. Cash flow is one of the reasons. A startup that doesn’t know how to track and forecast cash flow will not be able to manage its budget or invest in growth.
Important startup accounting records such as income statements (revenue and expenses) and financial projections are crucial to prove the viability of your business model to investors. These models must be carefully calculated to accurately represent the true economics of your business, including easy to overlook costs like taxes, shipping, insurance, payment processing fees, and utility charges.
If traditional lenders aren’t a viable option family members and friends can provide financing to startups in the early stages. In this case, however, it is crucial to have any loan conditions written down so that there aren’t any conflicts regarding the repayment obligation or future performance expectations.
Startups can also look for venture capital from an investor from the private sector or crowdfunding platforms like Kickstarter. These types of financing usually require a business strategy, which includes a detailed financial forecast. Creating a model allows you to gain a better understanding of your company’s finances, allowing you to make educated decisions regarding the amount of capital you will require and the strategic goals you’d like to achieve by the end of next year.
