Financial Startup Basics

The financial complexities involved in starting a business from scratch can be overwhelming. Understanding key startup financial terms will allow you to make educated decisions and efficiently manage your resources.

Basic Bookkeeping: Accurate record keeping is the basis of financial management. It is a necessity for any startup hoping to secure funding from investors or lenders. This includes GAAP-compliant financial statements (income and expenses), cash flow, the balance sheet, and financial projections.

Revenue & Costs: Monitoring and tracking the amount of revenue, operational expenses and other expenses is a vital part of financial startup foundations. This helps startups control the acquisition of customers, customer turnover, and revenue growth. It helps them understand how pricing of customers, product features, and other factors impact their bottom line.

Financing: Startups depend on personal loans and credit cards to fund their operations. This method can be costly and risky for new businesses, especially if the company fails to fulfill its repayment obligations. Alternative methods of financing for startups include business line of credit, equipment leasing, and crowdsourcing platforms.

Cash Flow: A startup needs to be able forecast its cash position at any given time. This can be a problem for startups that bill annually or in arrears in accordance with usage. They aren’t able to give an accurate picture of their financial situation over time. Streamlining the payment process as well as ensuring that vendor payments are made on time, and accurately recording ownership of equity can aid startups in avoiding cash flow problems.