Typical entrepreneurs begin their companies because they have big ideas that they want to promote. These good ideas may have been developed after years of research or because of experience in an industry. Company founders want to spend time focused on turning these new ideas into a growing business. At the same time, most business founders don’t really care to spend time on the nuts and bolts of their company’s finances. Still, the financial strength of a company may not hinge on how good of an idea the founder has; it can totally depend upon how well the owner manages their finances.
3 Important Financial Tips for Fledgling Companies
A successful business owner doesn’t need to have an Ivy-League MBA to manage their business’ finances. Consider these practical tips to develop solid financial management habits:
1. Don’t Wait to Start Bookkeeping
Typical small business owners start off by managing their company’s finances with a checkbook or credit card. In the rush of developing and promoting a new company, it might seem like it will be easy enough to catch up on proper accounting and bookkeeping practices later. However, it’s actually much easier, and more efficient, to start the business by keeping proper records from day one.
There are a lot of good options for simple accounting software that are fairly intuitive and quick to use. Some even integrate with other systems, like payment processors or customer retention software. The right accounting records can make it easier to make good decisions and keep novice business owners from making major mistakes.
2. Invest in the Company’s Core Strengths
It’s really important for young companies to focus on activities that can generate revenue and lead to business growth. It’s also important to make sure that the business owner devotes his or her time to those activities that can most quickly lead to long-term stability. Even though a new entrepreneur may have a very broad vision, it’s usually best to start small and stabilize a core business first.
For instance, a retailer or manufacturer might begin with one or a small number of products at first. In the case of a product developer, it might be better to ensure the product’s basic functions work well first. It can always get upgraded later. Besides just developing a product or service, the company also needs to promote itself, develop customer relationships, and accomplish many other tasks. Later, it’s possible to improve and expand upon these products.
3. Understand Cash Flow and Sales Cycles
It’s very difficult for some new business founders to understand that a company won’t necessarily succeed or fail because of its revenues; however, its performance and survival will certainly depend upon good cash flow management. For instance, a tax accounting office might enjoy the highest revenues during tax season and then experience a slow period during the next quarter. When a new company is first starting out, the hardest thing might be to make sure there is a funding cushion to manage fixed expenses during a normal slow season.
Cash reserves are fantastic, but most startups haven’t had a chance to build up a large store of fund to tide them over during slower times. An online line of credit can offer a business owner ongoing access to business funds and peace of mind. An internet lender can use technology to expedite the process of applying for and funding loans. These can offer a good solution for companies that have begun to sell but haven’t had time to build up a strong business credit score or a lot of equity. This is because these new lenders are able to use alternative data sources to confirm the company’s activities.
Managing Finances Leads to Small Business Success
Good financial management helps companies survive during lean times and thrive when times are great. While entrepreneurs may not care for this aspect of their business, good financial management habits can keep companies running even when faced with business challenges. If there is one part of running a business that new business founders should strive to improve, it is managing their finances and finding resources that can help.
