Basics of financial startup are the fundamentals that startups must be aware of to ensure financial health and secure the funding required for growth. Nine out of ten failures in startups result from a lack of these essentials. The reason for this is simple – cash flow. Without an understanding of how to track and forecast cash flow, a new business cannot manage its budget or invest in growth.
The most important accounting records for startups like income statements (revenue and expenses) and financial projections are essential to prove the viability of your business plan to investors. These models need to be carefully calculated to accurately reflect the true economics of your company and include cost that are easy to overlook such as taxes, shipping as well as insurance, payment processing fees, and utilities.
If traditional lenders aren’t a viable option family members and friends can provide financing to startups in the beginning. However, in this scenario, it’s important to put any loan terms in writing so that there are no disputes over repayment obligations, or expectations for future performance.
Startups can also search for venture capital from crowdfunding platforms or private investors such as Kickstarter. These kinds of financing typically require a written business plan, which includes a detailed financial forecast. Making a model helps you to gain an understanding of the financials of your business, allowing you to make educated decisions about how much capital you require and what strategic goals you want to achieve by the end of next year.