The basics of financial startups are essential that every startup should know to ensure their financial stability and secure the funds they require to grow. Nine out of ten startup failures are the result of an absence of these basic elements. Cash flow is the reason. Startups that do not know how to track and forecast cash flow will be unable manage its budget, or invest in growth.
Important startup accounting records such as income statements (revenue and expenses) and financial projections are necessary to prove the viability your business model to investors. These models must be carefully calculated to accurately represent your company’s true economics as well as the easy to overlook expenses like shipping, taxes, insurance, payment processing fees, and utilities.
In the beginning startups may be able to get financing from family and friends if traditional lenders are not an alternative. In this situation, however, it is important to have loan conditions written down so that there aren’t any conflicts over repayment obligations or future performance expectations.
Startups can also look for venture capital from an individual investor or crowdfunding platforms such as Kickstarter. However, these kinds of financing typically require an outline of the business plan that includes a detailed financial model. A model can help you to better understand the financials of your business, allowing you to make educated decisions about the amount of capital you need and what strategic goals you want to accomplish by the end of the year.