Mistakes abound when you are getting a sudden inflow of income and you lose track of your expenses. Reckless spending leads to quick burnout of cash whether you are bootstrapping or funding your business through venture capitalists. You should know where every rupee in your business is coming from, and where it is going.
Financial proficiency does not come easy for many entrepreneurs, and that is OK as long as you work on how to get help in financial management. Here are six simple finance tips and tricks for startups –
1. Set financial goals
Financial goals are not just for profits from business, but also for returns from your investments. Set your target for income and expenditures for 6 months, a year, or even 3 years and build your investment portfolio accordingly. Even if you don’t meet your target, you will still be on the path to achieving it – which is better than aimless financial drifting.
2. Invest your capital and profits into building more money
Many startups just keep their surplus cash idle in banks which is a major mistake. You can invest your extra cash in low to medium risk mutual funds, SIPs or fixed deposits. You needn’t invest big amounts. Even micro-investments can lead to good returns which will benefit your business in case you need money in an emergency. A short online course in investments and financial planning can help you make informed investment decisions.
3. Spend money intelligently
You can work well from a co-working space rather than taking your own rented building. Hire interns or part-time employees rather than full-time ones. Find free and simple software for your initial needs. Invest in simple accounting software or apps, and learn to manage finances on your own till the time you can hire someone else to do it for you. Look for the most economical ways to market your product or do business development. Planning your budget wisely is the key to success.
4. Track how you spend your time
Time wasted is money wasted. If you are spending your daily 24 hours wisely, it has a major impact on your ability to generate business and money. Successful entrepreneurs use simple habits to stay effective. It usually takes at least 21 days to make a new habit. Whether it is about investing time in personal health, or reading inspirational books, invest your time well.
5. Eliminate credit card expenses
Spending through credit card is alluring when you see funds coming in. But you can do it only if you can pay the debt every 30 days. Even then, you don’t realize when the debt goes out of hand. This can quickly suck in the money that could have been used elsewhere to grow your business.
6. Keep a record of payments and taxes
According to the 2017 ruling by the Government of India, you cannot pay more than Rs. 10,000 in cash. Keep your payments to cheques, drafts, or bank transfers for easy tracking at the end of the year. It will also help you avoid tax penalties.
These easy finance tips will help you manage expenses better, avoid financial stress, and focus on your passion – making your product and service better, and finding the right clients.