Managing startup finances is very important because it can affect the overall operations and survival of the business. Without a proper financial report, a startup can be out of business in no time. To help you understand more about the importance of managing finances, keep reading to know more about the ultimate benefit below. 

  • Obtaining financing

Good financial management can help startups obtain financing from investors or any other financial institution. Investors tend to be more interested in financing startups that have a clear financial plan and an organized strategy.

It is only natural for investors to feel more confident with startups that have good financial management. This can help to increase trust and open up greater investment opportunities.

  • Increase efficiency

By monitoring expenses and managing cash flow, startups can improve their operational efficiency. Thus, unnecessary expenses can be avoided and the money obtained can be allocated for product or service development.

  • Improve decision making

Making any business decision can be made much easier when you have accurate and up-to-date financial data. With proper finance management, startups can evaluate their business performance easily, do comparative performance over time, and thus be able to make data-driven decisions.

  • Prevent any financial problems or loss

If startups are unable to manage their finances, they can experience financial problems such as cash deficits, unpaid debts, and difficulty paying employees’ salaries and other bills. This is a great recipe for a startup to finally go bankrupt. Good financial management can help startups to avoid this kind of problem in the future

Managing startup finances can help startups grow and develop well. One example of a startup with smooth financial flows is Zoom. Zoom is a company that provides online video conferencing services, which has been on the rise since the COVID-19 pandemic and the proliferation of online mode meetings.

In 2020, Zoom reported annual revenue of $2.65 billion with a profit of $88.7 million. The company also has cash reserves of $1.87 billion! Even with the current condition, where everything has slowly gone back to normal – the current shift of individual preference still makes Zoom remains as one of the leading platforms for video conferencing.

How to Manage Startup Finances Better?

Startup finance can be tricky because startups have unique and different needs from any established companies. When you want to manage startup finances, keep in mind that there are 5 important things that need to be done.

  1. Create a clear financial plan

Startups must have a clear and detailed financial plan, including revenue and cost projections for their short and long-term goal. This financial plan must be updated regularly for the startup to be able to adapt to the changing market conditions.

With a proper financial plan, you will be able to manage cash wisely. Startups should have a clear strategy for managing cash, such as creating a monthly budget, monitoring cash flow, and ensuring that invoices and payments are made on time. Startups also must pay attention to every expenditure made so as not to exceed the budget. Expenses should always be reviewed periodically and even reduced if necessary.

 1. Have a thorough finance bookkeeping 

Accurate and concise finance bookkeeping is very important for any startup to have. Accurate financial bookkeeping can help to manage finances properly, make accurate financial reports, make it easier to apply for loans or investment capital and avoid errors and fraud. Ensuring startups regularly do their bookkeeping recaps is important for business continuity.

 2. Understand about the taxes

Startups must understand the rules and taxes that apply to their business. This includes income tax, sales tax, and any other tax computation that may be imposed on startups.

 3. Build good relations with investors

Investors are an important source of funds for startups. Therefore, startups must build good relationships with investors and ensure that they always get accurate and up-to-date financial reports.

 4. Looking for additional sources of funds

Apart from relying on investors, startups can also look for additional funding sources such as loans, crowdfunding, or government programs that can help to support startups. However, it must be ensured that the use of these additional funding sources is appropriate and efficient.

By following the steps above, startups can better manage their finances and avoid financial problems that may arise in the future. Keep in mind that good financial management can help startups achieve success and sustainable growth. Thus ensuring that you pay attention to this if you are currently about to, or already building a startup is a must!