The financial challenges of starting a new business can be overwhelming. Understanding the most important terms in finance for startups will allow you to make educated decisions and effectively manage your resources.
Basic Bookkeeping: Accurate record-keeping is the foundation of financial management. It is essential for any startup looking to raise funds from investors or lenders. This includes GAAP-compliant financial statements (income and expenses) as well as cash flow, the balance sheet, and financial projections.
Revenue and Costs: Tracking and monitoring operating expenses, revenues and other costs is a vital part of financial startup fundamentals. This process assists startup founders control customer acquisition, churn, and growth in revenue. It helps them understand the impact of pricing for customers as well as product features and other factors on their bottom line.
Financing: Startups depend on personal loans and credit cards to finance their business. This is an expensive and risky option for startups, especially in the event that they fail to fulfill the repayment obligations. Alternative financing options for startups include business line of credit, equipment leasing and crowdsourcing platforms.
Cash Flow: Startups must to be able to predict their cash position at any given moment. This is a problem for startups who bill annually or in arrears in accordance with the usage. They are unable to provide an accurate picture of their financial situation over time. Streamlining the payment process and ensuring that vendor payments are timely, and accurately recording ownership of equity can help startups avoid cash flow problems.