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In a nutshell, startups will stand a better chance of persisting in our peculiar commercial environment if they get their finances right. If you’re looking for some advice that’ll help you grow your enterprise beyond its early stages, here are steps you can take to achieve that:
Thoroughly Study Business Finance
The first thing you’ll want to do is gain a decent grasp of business finance. This means familiarizing yourself with balance sheets, profit and loss statements, cash flow statements, and other key financial records. If finance isn’t your strength, consider taking a basic course or seeking guidance from a mentor.Keep Business and Personal Finances Separate
One common mistake that entrepreneurs make is keeping their personal and business funds in one account. This seldom bodes well for them, as they’re more likely to deplete their business funds when they’re lumped with your private money. Prevent this from happening by opening a dedicated business bank account. This will simplify accounting for you and indicate to your customers that your business is legitimate.Be Extra-Keen on Bookkeeping
Regular and accurate bookkeeping should be non-negotiable. Whether you’re using accounting software, hiring a part-time bookkeeper, or doing it manually, ensure all transactions are recorded. This helps in tracking expenses, understanding your business’s cash flows, and making informed financial decisions. Your financial records can clue you in on which aspects of your startups have a decent ROI and which ones don’t.Embrace Frugality
In the early stages, it’s vital to adopt a lean approach. You probably won’t have a lot of resources at your disposal. So you’ll need to be careful with your spending. Analyze every expense and ask, “Is this absolutely necessary?” Avoid lavish offices and unnecessary perks. Instead, focus on what directly contributes to your product or service’s development and market traction.Build a Financial Cushion
Tech startups face unpredictable challenges. Having a financial buffer can make the difference between weathering a storm and sinking. Building one means continually saving some of your profit so that it accumulates over time. Aim to have enough runway for 6–12 months, factoring in all operational costs.Sign up for the Connect Nigeria daily newsletter
Forecast and Budget
Use financial forecasting to predict future income and expenditures. This gives clarity about how much you can expect to earn and spend. With this information, set clear budgets. You should also regularly compare actual results with forecasts and adjust accordingly.Be Cautious with Debt
While it’s tempting to take on debt or give away equity for quick capital, you’ll need to be careful about securing more debt than you can handle. Understand the terms of any loans or investment offers. Just make sure that you’re not compromising the long-term health of your startup for short-term gain.Regularly Review Finances
Set aside time weekly or monthly to review your financial statements. This helps in catching discrepancies, understanding your financial health, and making timely decisions.Plan for Taxes
Tax obligations can sneak up on unsuspecting tech startups. If you want to stay on the right side of the law, you should do all you can to stay up-to-date on your tax filings. Just as you’re doing with an emergency buffer, set aside money regularly to avoid scrambling during tax season. You can consult with a tax professional to optimize deductions and credits.Secure the Right Funding
If you seek external funding, be strategic. You may go for venture capital, angel investors, bank loans, or crowdfunding. Whatever you settle for, choose a source that aligns with your tech startup’s vision, needs, and long-term plans.Register to attend the CN Business Mixer
Final Words
Financial management might seem daunting, especially when you’re juggling numerous startup responsibilities. However, with discipline, foresight, and regular attention to your startup’s financial health, you’ll lay the foundation for sustained growth. Featured Image Source: European Venture MarketGot a suggestion? Contact us: editor@connectnigeria.com
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