Financial Startup Basics

Financial startup basics are the fundamentals that startups must know to ensure financial health and secure the funds required for growth. Nine out of ten startup failures are due to insufficient knowledge of these vital elements. The reason is simple: cash flow. Without a grasp of how to track and forecast cash flow, startups will be unable to manage its budget or invest in growth.

Essential 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 calculated carefully to accurately reflect your business’s economics. This includes easy-to-overlook costs such as shipping, taxes and insurance, processing fees for payments and utilities.

In the early stages startup companies can get funding from family and friends if traditional lenders are not an option. In this instance, however, it is important to have any loan conditions written down so that there aren’t any conflicts over repayment obligations or future performance expectations.

Startups may also seek venture capital from crowdfunding platforms or private investors such as Kickstarter. However, these kinds of funding usually require an approved business plan that includes a comprehensive financial model. Making a model helps you to understand the financials of your company, which allows you to make informed choices about the amount of capital you will require and the strategic goals you want to accomplish by the end of the year.

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