Being a startup founder brings numerous responsibilities. One such responsibility that a founder confronts is managing startup finances. Every startup needs full involvement from the founder during its initial days, and then gradually, the responsibility is shared with other members of the startup. 

Financial Management for Startups 

Before we move toward learning the steps for financial management, let us quickly understand why we need startup financial management. Financial management is a process by which we can prevent and manage the economic issues of the start-up. This also helps in budget financing and resource planning.

Let us quickly see the aspects of financial management thoroughly. 

Budgeting and forecasting 

A budget is a financial synopsis of all the estimated revenues and expenditures for a specific period. Forecasting is based on the assumption that all the finances are entirely focused on past expenses and expected spending in the future. Budget and forecasting are the two main aspects of financial management. Hence, they should be adequately built. 

Cash flow management 

Cash flow refers to the movement of cash in and out of your startup. This cash flow process is one of the crucial processes for any startup. In a cash flow crisis, your startup may experience a considerable financial decline. For that reason, cash flow has to be managed correctly. To decrease the company’s cash outflow, you can cut down various expenses. Make sure you work your inventory as well. 

Financial reporting and analysis 

Financial reporting includes typical financial statements like payment statements, balance sheets, and cash flow statements. Such reports are crucial for understanding a company’s financial execution and assist you in making informed conclusions. Analysis of these reports helps acknowledge ongoing trends, strengths, and weaknesses of the financial performance of the startup. 

Tax and regulatory compliance

Even if it is a startup, follow-up of tax norms is mandatory. Failing to comply with any rules and regulations, including tax returns, can lead your business into legal trouble, and even penalties can be imposed on your startup. So to avoid such problems, make sure you comply with all the rules and regulations. 

Top Tips for Startup Financial Management 

We are bringing some crucial tips for startup financial management which will help you to manage your finances. These tips will enhance your financial management resulting in the improvised setup of your company.

Understand your burn rate and runway 

Burn rate refers to the money spent on various expenses such as salaries, rent, utilities, marketing, and additional operating costs. Maintaining a record of the burn rate will help you understand your monthly expenditure. 

The runway is such an amount that it can be operated with cash reserves before it gets out of money. It is calculated by dividing the current cash reserves by the monthly burn rate of your startup. 

By knowing these two, you will be able to 

  • Decrease the burn rate of your startup by cutting down the unnecessary expenses. 
  • Monitor the expenses of the startup to limit the problem of overspending. 
  • Concentrate on financial upliftments. 
  • In case your runway gets shorter, you will have a backup plan ready. 
  • Communicate with the team of stakeholders, investors, and financial advisors to discuss the financial health of the startup. 

Separate your personal and business expenses

As a startup founder, it is necessary to separate personal expenses from business expenses. This will help you understand the dynamics of the financial turnover of your startup. 

Also, this particular separation between your personal and business expenditures will save you from legal troubles. What if your business suffers a loss and you have not separated the business expenses from the personal ones, then your personal assets can be held for the repayment of the loan. 

The separation between personal and business expenses is necessary to avoid such situations and other financial chaos. 

Use technology to automate financial processes 

With the help of technology, your startup can automate various financial processes to ease them. The use of these technologies can help in decreasing errors, conserve time, and provide real-time insights.

Here are a few technologies that can be used for your startup. 

  • Accounting software – Accounting software is helpful in bookkeeping processes. This software automates the creation of invoices, bank account reconciliation, and financial reports. 
  • Expense management tools – Expense management tools are for automating the process of payment reports for start-ups. These tools allow users to click real-time photos of receipts and then further categorize them. 
  • Payment solutions – Payment processing solutions are exclusively meant for automating the process of payment for startups. These solutions can process online payments, track expenditures, and provide real-time reports based on the company’s revenue.
  • Financial planning and analysis tools – Financial planning and analysis tools have always been reliable tools for automating startups’ budgeting and forecasting processes. Such devices provide real-time insights into financial execution and can help startups to create informed conclusions about their financial future.
  • Tax software – Tax software can save your startup from falling into any legal troubles and can automatically calculate tax liabilities, prepare tax forms, and file tax returns, which will help reduce human efforts and time. 

Plan for future fundraising and investment 

Any startup requires prior planning for any upcoming milestones or setbacks. This includes all the measures taken during the time of loss or crisis, future investments, fundraising, etc. 

Here are a few steps that you must know before you plan for future fundraising and investment for your startup. 

  • Always draft a financial plan highlighting the revenue and expenditure of your startup for the upcoming years. 
  • Estimate the need for funds according to your future expectations from your startup. However, these estimations must include the current financial position, revenue projections, and growth plans of your startup. 
  • Create an investor pitch outlining the objectives of the startup as well as value proportions. Make sure this pitch contains financial plans, revenue projections, and growth strategies, as well as an overview of market opportunity and competitive landscape for the startup. 
  • Maintain a healthy relationship with your current and future investors. Try to attend networking events so that you can connect with potential investors for your startup. 
  • Construct a report highlighting your startup’s fundraising goals, milestones, and timelines. Also, enlist that investor who you think will best suit your startup, along with a proper meeting plan. 
  • Be prepared from your end to answer all the queries raised by investors. They are more likely to ask about the market opportunity, competitive landscape, revenue projections, and management team of the startup. Keep your data up to date while answering these queries. 

Seek professional advice when necessary 

Always go for professional assistance in any situation which you find difficult to tackle. We understand the depth of startup operations, including financial management. We, as a professional, always strive for the best possible assistance for your startup, and we ensure that you should not worry about the cause of why you have reached out to us. 

Tools for Startup Financial Management 

Here are a few tools for startup finance management. These tools will help the financial management of the startup go with more ease and get better results. 

Cheqly’s online banking platform 

Our online banking platform provides domestic and international transfers with ease. It works as a full-fledged business account which comes with a VISA debit card at no cost to your startup. You can get features like virtual card and online transfers, etc. With our online banking platform, startups can manage their cash flow more effectively and save time on financial responsibilities. 

Accounting and bookkeeping software

A popular software for accounting and bookkeeping is QuickBooks. This software provides features like automatic bank sync, drafting invoices, and payment tracking. QuickBooks helps your startup bag the top position in financial management and make effective decisions for it. QuickBooks Online offers 40% off for the first 6 months for Eqvista clients and thanks to Cheqly’s partnership with Eqvista, we can offer this to our clients as well. This could be the best start for your startup. Make sure you do not miss the opportunity! 

Financial modeling tools 

Various financial modeling tools, such as Excel and Google Sheets, can help the startup create economic projects and evaluate its performance. These tools are also helpful in analyzing the impact of decisions and planning further. 

You can also see your finances as per the Eqvista’s financial model via waterfall analysis and round modeling. In the waterfall analysis method the investors and shareholders can divide the finances of each of them when the business becomes solid. On the other hand, the round modeling method helps investors and shareholders to see how the company’s cap table is diluted.

Improve your Startup Financial Management with Cheqly!

Effectively managing your finances is crucial for the success and growth of your startup. As we have learned from our experiences, implementing the right financial management strategies can make a significant difference in your startup’s trajectory.

Whether you’re just starting out or looking to optimize your current financial management practices, take the necessary steps to improve your startup’s financial management with us. With the right expertise and resources at your disposal, you can confidently navigate the economic challenges of entrepreneurship and pave the way for a prosperous future.

Join Cheqly

Never miss any payment or leave your company without an opportunity to keep rolling.

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Join Cheqly

Never miss any payment or leave your company without an opportunity to keep rolling.

Get Started