Financial Startup Basics

The financial challenges of starting a new business may feel overwhelming. Having a clear understanding of important financial terms for startups is essential for making educated decisions and effectively managing resources.

Basic Bookkeeping: Accurate record-keeping is the basis of financial management. It is a necessity for any startup that wants to raise funds from investors or lenders. This includes GAAP accounting that is compliant with GAAP (income, expenses) cash flow, the balance sheet.

Revenue & Costs: Monitoring and tracking the amount of revenue, operational expenses and other costs is an important part of financial startup fundamentals. This process aids startup founders control customer acquisition, churn, and growth in revenue. It helps them understand how price of their customers products, features, and other factors affect their bottom line.

Financing: Startups rely on personal loans and credit cards to fund their operations. This is a risky and costly option for startups, particularly in the event that they fail to fulfill their obligations to pay. Alternative sources of financing for startups include business lines of credit, equipment leasing and crowdsourcing platforms.

Cash Flow: A startup has to be able to predict its cash flow at any point in time. This can be a challenge for companies that invoice annually or in arrears according to usage, which aren’t able to provide an accurate view of their cash balance over a period of time. Startups can minimize cash flow issues by streamlining the payment process and ensuring vendor payments are made promptly, and accurately recording ownership equity.