The basics of financial startups are essential that every startup should know to ensure their financial stability and get the funding they require to grow. Without these basic requirements nine out of 10 startups fail. Cash flow is one of the reasons. Without a grasp of how to monitor and forecast cash flow, a new business is not able to manage its budget or invest in growth.
The most important accounting records for startups like income statements (revenue and expenses) and financial projections are essential for demonstrating the viability of your business model to investors. These models should be carefully calculated in order to accurately reflect your company’s economics. This includes easy-to-overlook costs such as shipping, taxes and the cost of insurance, payment processing fees and utility costs.
If traditional lenders aren’t available, family and friends can lend money to startups in the early stages. But, in this case it is essential to put any loan terms in writing to ensure that there aren’t any conflicts over repayment obligations or expectations for future performance.
Startups can also look for venture capital from private investors or crowdfunding platforms such as Kickstarter. These types of funding often require a written business plan, that includes a comprehensive financial forecast. The creation of a model will allow you to understand the financials of your business, allowing you to make informed decisions about the amount of capital you will require and the strategic goals you want to achieve by the time next year rolls around.