Financial Planning for Startups: Navigating Challenges and Seizing Opportunities
If you’ve started a new business, you are likely at the point where you’re wondering if you’ve made a huge mistake. No matter how invested you are in your idea or your growing business, this is practically a rite of passage for every new entrepreneur – and rightfully so, when so many new businesses fail in the first year.
There are so many industrial and economic factors at play in the wider potential for business success, and so many moving parts in what proves to be an especially difficult time for businesses at present. As someone without the decades of experience necessary to navigate these times with ease, you are right to go looking for the best advice you can find. Here, you’ll find just one branch of such advice, relating to the shoring-up of your business’ finances for the betterment of your long-term potential.
Understanding Startup Finances
First, let’s look at the common financial challenges for the nascent small business in the UK. Most businesses will find themselves struggling to get off the ground as a result of limited initial capital, particularly where it’s a sole entrepreneur using personal savings and personally-guaranteed financial products to launch.
After launch, there’s the issue of cash flow volatility; more money leaves than arrives, even if that money is being invested in infrastructure – the result being a poor financial outlook as far as investors are concerned. All of this, of course, comes before the uncertainty around where your revenue will actually come from.
Practical Tips for Financial Planning
The first port of call, then, for proper financial planning of your small business, would be to spend time with your budget. A realistic budget, that forecasts a smart allocation of resources, needs to be drawn up in order to get a strong foothold in your market. Do your research into overheads, supplier costs, employment costs and contingencies, and illustrate them in your budget – no nasty surprises.
As your business gets underway, you’ll get a clearer idea of your cash flow and related cash flow needs. There are clever ways to step investment payments so as not to result in months of consecutive negative cash flow; likewise, there are early agreements you can draft for suppliers and clients, which set strong terms for payment and credit that help you manage incoming money to the same ends.
Outsourcing Accountancy
Every business needs accounting. This is how money is tracked, tax obligations are met, and businesses remain compliant against an ever-shifting regulatory landscape. Not all businesses need an accounting department, though – expensive as it can be to populate one with employees. This is why it can be a smart move for small businesses to work with SME accountants, who take on the workload and ensure no gaps remain in your reporting.
There are a few benefits here, not in the least the freeing-up of your time as a business leader to focus on growth. With an accountancy looking after your financial reporting, you’re in a better place to share data and analytics with partners, as well as to approach investors for more funding.
