Financial startup basics are fundamentals that startups must have a firm grasp of to ensure financial health and secure the funds needed for growth. Without these essentials, nine out of ten startups fail. The reason is simple: cash flow. A startup that doesn’t know how to monitor and forecast cash flow will not be able to manage its budget or invest in growth.
Essential startup accounting records, such as income statements (revenue and expenses) and financial projections are necessary to demonstrate the viability of your business plan to investors. These models must be meticulously designed to accurately portray your company’s true economics and include easily overlooked costs like shipping, taxes and insurance, processing fees, and utilities.
In the beginning startups may seek out financing from family and friends if traditional lenders are not an alternative. In this situation, however, it is essential to have all loan terms outlined so that there aren’t any conflicts regarding the repayment obligation or future performance expectations.
Startups can also seek venture capital from crowdfunding platforms or private investors such as Kickstarter. These types of financing usually require a business plan that includes a comprehensive financial forecast. You can gain a better understanding of your company’s finances by constructing an accounting model. This will allow you to make informed decisions on how much capital to put into and what strategic goals to achieve in the next year.