Basics of financial startup are the fundamentals that startups must have a firm grasp of to ensure their financial health and secure the funding needed to grow. Without these basics, nine out of ten startups fail. Cash flow is the primary reason. Startups that do not know how to track and forecast cash flow will not be able to manage its budget, or invest in growth.
Key startup accounting records like income statements (revenue and expenses) and financial projections are essential to demonstrate the viability of your business model to investors. These models have to be calculated carefully to accurately reflect your company’s economics. This includes easy-to-overlook costs like shipping, taxes and insurance, processing fees and utility costs.
In the early stages startups may be able to get financing from family and friends if more traditional lenders are not an alternative. In this situation however, it’s crucial to have any terms of the loan written down so that there aren’t any disagreements regarding the repayment obligation or future performance expectations.
Startups may also look for venture capital from a private investor or even crowdfunding platforms like Kickstarter. However, these types of financing often require an outline of the business plan that includes a comprehensive financial model. You can gain a better understanding of your company’s finances by constructing models. This will help you make informed decisions about how much capital to put into and what strategic goals you want to attain in the coming year.
