Financial Startup Basics
Financial complexity can be overwhelming when you first start an enterprise. Understanding the key terms used in startup finance will allow you to make informed decisions and effectively manage your resources.
Basic Bookkeeping: Accurate record-keeping is the basis of financial management. It is essential for any business that wishes to get funding from lenders or investors. This includes GAAP certified financial statements (income and expenses), cash flow and an account of balance.
Revenue & Costs: Monitoring and tracking operating expenses, revenues and other costs is a vital part of financial startup basics. This process helps startups manage customer acquisition, customer turnover and revenue growth. It also helps them understand the impact of pricing at the customer, product features, and other factors on their bottom line.
Financing: Startups depend on personal loans and credit cards to fund their operations. This is a risky and costly option for startups, especially if they fail to meet their obligations to repay. Alternative sources of financing for startups include business credit lines, equipment leases, and crowdsourcing platforms.
Cash Flow: A startup must to be able predict its cash position at any time. This can be a challenge for startups who bill annually or in arrears based on the usage. They are unable to provide a precise picture of their financial position over time. Startups can minimize cash flow issues by streamlining the process of payment, making sure vendor payments are made promptly and accurately recording ownership equity.
