As an owner of a startup company, an entrepreneur usually tends to get captivated with the day-to-day business activities and tends to forget about long-term goals. However, if you are planning to display a bigger picture of your business, then it is imperative to have diligent financial planning. The success of your startup business depends upon efficient financial planning and effective management, along with various other related aspects.
The primary reason for startups to fail is the lack of sufficient funding. Hence, it becomes important for the owners to keep a regular check on their credit scores and try improving it, as they might require instant funds during business tenure to overcome urgent cash crunch situations. Therefore, to keep themselves up-to-date regarding their credit scores, they can check it for free at Paisabazaar web and app platform and receive monthly reports in multiple languages. Apart from their individual credit score, they can now stay updated with their business’ credit report as well. This check shall help them to improve it further and avail hassle-free funds at competitive interest rates with no impact on credit score and credit rank.
Read on for some useful financial planning tips and suggestions for startup owners to enhance their business’s efficiency, productivity and profitability:
11 Financial Planning Tips for your Startup Business
Set Financial Goals
Always think, implement and execute your short-term and long-term goals by tracking your actual expenditure, volume and profit against the projected goals. After preparing your financial goals, you can start to create a financial budget that shall benefit you in the short, as well as, in the long run.
Create a Budget
Preparing a budget is an integral part of the financial planning process. Just as you prepare your household budget, similarly you should also create an annual or half-yearly budget for your business. Initiate the process of creating a budget by estimating your expenses and income projections. Your company’s budget shall include both, fixed (rent, utility bills, salaries) and variable (marketing, advertising) costs, along with the miscellaneous costs.
Estimate your Business Expenditure
Figure out all of your essential and optional expenses and make an estimate regarding these costs. Make sure that your defined expenditure cost does not exceed in the due course of the business. In addition, keep a track of your monthly spending and make adjustments accordingly.
Define Monthly, Quarterly or Annual Targets
Every startup founder or owner should have set targets to work for and achieve it as per a defined timeline. You may create monthly, quarterly, half-yearly or annual targets depending upon your company’s requirements and scalability.
Maintain Healthy Credit Score
Good credit score usually helps in availing funds at ease with added benefits, concessions and even fee waivers. Credit score is a 3-digit numeric that ranges from 300-900 that is calculated, generated and issued by the India’s 4 credit bureaus or Credit Information Companies (CICs), named TransUnion CIBIL, Experian, Equifax and CRIF High Mark. Try maintaining your credit score above 750 and as close to 900 in order to avail loans from prospective lenders at attractive interest rates.
Manage Cash Flow
Cash flow is considered as the lifeline of any business, as without it several businesses may crash. Cash flow management is equally important as meeting your working capital needs, as without proper cash flow, your business could run short of money at times of dire financial requirements. Additionally, to manage cash flow you can also get online accounting software to simplify things by tracking real-time data.
Access your Working Capital Needs
Along with preparing a budget and setting targets, you should also access your day-to-day business requirements and analyse the funds required on a daily basis. To meet these requirements, start to build contingencies in your budget, as no owner shall like to drive the business from all of his/her savings.
Open Separate Bank Accounts for Business
Your bookkeeping process becomes difficult, if you are managing and operating your personal and business accounts together. It is highly recommended to open separate bank accounts or credit cards for business purposes, only.
Create an Emergency Fund
It does not matter if your business is partially or fully financed by the lending bank, wholly self-sponsored or an investor backs it, you should always have an emergency fund to keep cash in reserve that can be used at times of financial crisis. Make sure to have an emergency fund that can last for at least 6-12 months to overcome the crisis.
Plan for Accounts & Taxes
Always consult your personal accountant regarding accounting guidance for better business structuring. Meet your CA to resolve tax issues as there are various startup expenses that are tax deductible.
Offer Initial Discounts & Promotions
You may start offering discounts and promotions to customers on your latest product’s launches, as it boosts volume and results in a repeat customer base. Start various incentive programs for your customers to increase the volume and initial cash flow.
Key Takeaways:
Your startup business plan is a roadmap that leads to your company’s financial success. Financial planning before investing in your startup places you at comparatively safer spot in advance. From this position, you can set benchmarks, define deadlines, quantify business assumptions and deal with scenarios even prior to starting to make a profit. Your investors or lenders certainly show interest in your financial plan before sanctioning loans or credit cards. Therefore, before you start to venture out for your dream run, keep these useful tips in mind and start planning the right way.
