Steps to get your start-up on track
From fledgling startups to well-established ventures, companies today need to be ready to pivot as unpredictable markets could demand a shift in a business model. At times, it can seem difficult (even impossible) to weather these extraneous forces — especially as a new venture. Here are tips on how a start up can survive the stormy weather.
- Keep your finance seperate:
Regardless of the type of business you are running, you need a separate bank account from your personal bank accounts. Having a separate bank account keeps records distinct and will make life easier come tax time. Many starts-up are dead today because the owner spent part of the capital meant for running the business on private things because the finances of the business is not distinct from the owners’.
- Record all incomes and expenses:
It can seem pretty daunting to record every receipt, every mile and every dollar earned but it is essential. The foundation of solid business record keeping is learning to track your expenses effectively. It’s a crucial step that allows you to monitor the growth of your business, build financial statements, keep track of deductible expenses, prepare tax returns, and support what you report on your tax return. Right from the beginning, you should establish a system for organizing receipts and other important records using a simple excel spreadsheet to implementing a bookkeeping software.
- Develop a bookkeeping system:
A good bookkeeping system helps to keep your record intact. You can decide to use simple bookkeeping system such as Sage One or a more robust one like Sage evolution. Your bookkeeping function can as well be outsourced to free up time to concentrate and other aspect of the business especially when the business has grown considerably. With so many options out there, you’re sure to find a bookkeeping solution that will suit your needs.
- Develop a process of tracking and collecting payment:
Have due dates for payment and penalties for not following your guidelines. As sales progresses, it is highly important to not only have a sales process, but a collection process. It doesn’t need to be elaborate, but putting in place things like contracts, invoicing, late fees, etc. can make such a major difference.
- Manage your cash:
In order to help manage the funds that you do have, you will want to establish financial controls to provide your startup with a solid foundation. You will need to have disciplined controls to ensure solid growth and help you never run out of cash. You will want to adjust and re-adjust your projections for cash flow, never allowing the cash to run dry. This also means you need to set maximum limits of purchasing authority to keep partners or employees from overspending. Additionally, you will want to use an inventory control system and don’t overlook your suppliers as sources of financing or assume that all shipments are accurate or in good condition. Ask for term discounts, pay on time and always create purchasing contracts to ensure your goods are delivered.
- Do the math:
Improving your store’s gross margin is the first step towards earning more income overall. In order to calculate gross margin, you need to know the costs incurred to produce your product and compare that against your sales value.
- Build a smart team:
Don’t be afraid to hire people who know more than you, as long there is a good cultural fit. Outsource to buy expertise you can’t afford in-house, and to perform non-strategic business functions. By hiring people who could handle any challenge or task thrown at them, you would be able to keep your core team strong as the market changed and shifted. There is no monopoly of good ideas.
- Seek the help of a consultant/Adviser:
There will come a point in time where you need to seek outside help. This may mean contacting a lawyer to review your contracts. Or maybe you need help with tax preparation or even day to day bookkeeping. It is ok to invest in good help. Companies like PML Advisory provides financial advices to companies that you can leverage on.
- Constantly Re-evaluate Your Methods:
When you first start out you may opt to use a simple spreadsheet to manage your books but as you grow you’ll want to consider more advanced methods. As you keep growing, it’s good to continually reassess the amount of time you’re spending on your books, and how much that time is costing your business. The right bookkeeping solution means you can invest more time in the business with bookkeeping no longer on your plate, and potentially save the business money.
Finally, you need to spend more time growing your business than accounting for it. Remember, a misplacement of funds and lack of cash is the second biggest reason why startups fail.
Once you have a product that is worth taking to market and a plan in place to cultivate funding, you will be in a good place with your start-up.