15 Tips to Manage a Business Finances for Startups

Everyone wants to start a company in this age of globalization and commerce, but they are unsure how to get started, what factors to consider and How to manage business finance.

They do not think to fix priorities according to their requirements. Start your business with the belief to have success only. Believe that it will work and be sustainable.

According to business priorities, one should focus on managing small business finance. Managing the finances should be the foremost priority as this is a lifeline of a business. The success of your new business depends upon managing small business finance for startups.

Here are 15 useful tips for Managing Small Business Finance 

1. Prior to Start-up

Before startup, one has to make feasibility for new business. While its consideration following important points needs to be weighed and adopt an only suitable and profitable line of business

a. Selection of business Line

Before starting a business, the first decision you have to make is what kind of business you want. Then, just choose a realistic line about which you have some technical knowledge, which is not seasonal.

As an entrepreneur, you will have to study all the factors that may influence the selection of the type of business. It would help if you considered the risks involved in certain types of business lines.

b. Location of business

The location of any business plays an important role in success. A wise selection of business areas is important. You have to study that all the basic requirements are available in the area for your proposed business, such as electricity, road, and easy customer approach.

c. Analyzing your finance requirements

Some rely upon their own funding sources. Someone missing this source has to opt for others. You can go for bank loans, friend loans, and any other available source. In that case, only soft term loans will suit new startups. A low-cost loan will be the best option for generating funds.

2. Registration with Tax Department

When you are starting a business, register your business to make it a distinct legal entity.  It will make you ready to pay prescribed tax to the authorities and save yourself from paying heavy penalties for non-payment of tax. If you do not register it with any government entity, you may have to face personal liability protection, legal benefits, and tax benefits.

3. Opening of a Bank Account

Then you have to open a business account with any Bank to record the cash flow of your business. Without opening a bank account, you cannot run a business.

The purpose of this account is to receive payments from your buyers, make payments to your suppliers, and may other payments like utility bills so on. Also, this will make you eligible to avail finance from the Bank whenever you require.

4. Bookkeeping

Record each and every expense with immediate effect, whether this is for the purchase of raw material or any other item. Create accounts of your suppliers. It is preferable to register with reputable suppliers or merchants who will supply you with the products you need in a timely and urgent manner.

Similarly, create accounts of your buyers. Some of them will make instant payments, and some will demand to sell the goods on deferred payments.

a. Summary of receivables and payable will help to observe the financial health of your business.
b. It is advisable to install any app of Accounts on your PC to have a quick watch on your finance for startups.
c. For accounting purposes, you have to hire an intelligent accountant if you are ignorant of this field.

It would be best if you used financial management software for specific matters. For example, maintain a strict budget and keep a record of any transaction you generate.

To get a good view, make a lot of classes and sub-classes. It would be much simpler to prepare a financial plan in the modern world if you have a good vision.

5. Cash Flow Management

Observation of the cash flow of your company is most important. Management of Cash Flow means how much cash is coming into the account of the company and money flowing out. If your business constantly spends more than it earns, you have a cash flow problem.

The inflow of cash should be more than the outflow. The awareness of cash flow processes will help forecast the future and take corrective measures for the improvement of profitability.

A study conducted by Jessie Hagen of U.S. Bank reported that 82% of businesses fail because of poor cash flow management. You would not stay in business if you cannot pay your bills for an extended period.

6. Segregation of Business and Personal Expenses

If you want to be a successful business owner, it is very important to separate business and personal finances. Never mix up your business and personal expenses. Always keep your personal liabilities separate from your business liabilities.

7. Negotiations with the Suppliers

Before going into an agreement with your suppliers, you must have hectic negotiations to save you from paying extra charges. Usually, you have to pay 5 to 10 percent extra for late payments of goods/raw materials to the suppliers. With the facility of 30 days, a grace period for payment will save you payment of extra charges burden.

8. Reminders to the Buyers

Make it a habit to send reminders to your buyers against usance bills before one week of the due date. This will help your buyers to manage and arrange funds up to the committed date of payment. Hence you may have the funds for your working capital.

9. Making on-time Payments

Make it a habit to pay your bills in time, such as your business taxes, bank charges, utility bills, etc. This will save you from paying extra charges and penalties.

10. Austerity and Controlling of Expenses

For beginners, it is necessary to adopt the measures of controlling expenses. A new business can only be developed by adopting measures of austerity. Otherwise,

you can feel pressure on the financial status of the company. Do not waste your funds on the purchase of unnecessary fixed assets.

11. Budget for the Business

The development of an annual budget for the business will provide you a chance to fix goals and work hard for their achievement. You can take certain decisions ahead of time for the progress of your business.

12. Reserves for Rainy-day

From the very beginning, save some money in that account. Then, you can plan for the future but do not know what will occur in the days to come. The best example is the Covit-19 pandemic. Only adding a small amount to that account will give you a sigh of relief in the hard times.

It serves as a safety net when you go above your plan. Cash saving, for say, might come in handy if you forget an event or have a minor crisis. And the fact that this figure is included in the total expenses, you do not depend on it all of the way.

A cash reserve can also be used for commercial purposes, as it can be used to offset minor costs that were not planned for in the monthly spending. Again, the buffer can be used to offset unexpected expenses or items you did not realize you needed till lately.

13. Anti Fraudulent Steps

Every business requires the attention and vigilance of the owner for protection from fraud and data security threats. You have to watch that your business financial figures and customer data are safe. Regularly update anti-virus software in your system.

14. Publicity Through Social Media

Do not spend on marketing in the early stage. Instead, take a start through social media. This is a free and easy way to introduce your business to the market. You can post daily your analysis and tips etc and get the attention of the customers. In this way, you can save money for your business in the beginning.

15. Customized Selling

Reduce the number of goods or items you offer and supply what the customers desire! You will learn how to produce goods and programs to perform if you devote much effort to doing a marketing audit beforehand. What is the price of that rising item?

What are the best-selling items? Allowing you to be distracted by so many deals is not a good idea. Even if you are just getting in, fewer is enough.

Conclusion

Being frugal does not only imply wasting cash on necessities; it also entails informing yourself of your wasting habits. Consider the money you have when you shop for anything.

What effect does it have on your business and workflows? Is it bringing you joy? What effect does it have on your well-being and attitude now and in the future?

Until creating an important investment, begin to manage certain concerns. Training to invest wisely in actual situations, in my opinion, makes it much smoother to manage financial activities.