Let’s get down to business. There are some key things you need to know about your finances in order to take your company to the next level.
- Cash Flow Management
Understand your burn rate (how fast you’re spending money) and runway (how long your current funding will last). Monitor cash flow closely to spot negative trends early. Make sure you can cover operational costs and are prepared for future funding rounds.
- Accurate Expense Tracking
This is crucial for budgeting, financial planning, and tax purposes. Make sure you have access to your real-time data and you're not viewing your financial numbers from the previous month.
- Do I need a bookkeeper/ CPA?
After setting up your accounting software, you may choose to hire a bookkeeper - they will keep your accounting system up-to-date and make sure your financials are accurate.
Another role to consider hiring is a tax advisor, typically a Certified Public Accountant (CPA). They need to have experience in your specific industry to help you navigate the complexities of your unique financial landscape.
Ideally, the tools you use for accounting allow you to pull these people in as needed without having to actually hire one. Look for hybrid solutions like this that allow for flexibility.
- Cash vs Accrual Accounting
These two methods help you track and manage financial transactions. Cash accounting is straightforward; it records transactions only when cash actually changes hands. This gives you a very clear view of your cash flow. In contrast, accrual accounting takes a more comprehensive approach and records earnings and expenses when they occur, not just when money changes hands.
- Tax Obligations
Early-stage startups often benefit from various tax credits and incentives, research what is available to you.
Tip: check out these 2024 tax deadlines for startups.
- Equity and Cap Table Management
Keep accurate records of all equity issued, including founder shares, employee stock options, and any equity granted to advisors or consultants.
- Financial Forecasting and Budgeting
Develop and regularly update comprehensive financial forecasts and budgets across all your departments. Run a tight ship! Current and future investors will love it.
Forecasting serves as a roadmap for your businesses. It helps with financial planning and management, data-driven strategic business decisions, and mitigating potential risks. Puzzle is powering multiple great FP&A tools like Runway, Causal, Meow, and many others.
What to forecast:
- Revenue: Setting realistic goals and planning for growth. Be optimistic but reasonably so.
- Expenses: Predicting future costs, both fixed and variable, for maintaining profitability or appropriate runway.
- Headcount: Anticipate staffing needs before they arise. Plan for recruitment and training costs, along with dynamic elements like salary adjustments.
- Investor Reporting
Establish a routine and transparent reporting system for investors and any other stakeholders you want to include.
- Financial Compliance and Regulatory Requirements
Your company will have to follow all industry standards, local, state, and federal laws concerning your business finances. This includes understanding regulations related to financial reporting, employee wages, and data security.
- Risk Management and Mitigation
Regular risk assessments can help your company anticipate and respond to changes in the market or regulatory environment. Identify the risks specific to your venture; are we talking market volatility? Credit risks? Operational snafus?
Develop a comprehensive risk management strategy that assesses the impact of these risks, and outlines steps to mitigate them. This might involve diversifying revenue streams, implementing strong internal controls, and having good insurance coverage.
Remember, the goal isn’t to avoid all risks—that’s impossible. The goal is to navigate them in a way that keeps you moving toward long-term success and sustainability.
Managing your company's finances is an ongoing journey that includes every aspect of your startup's growth and sustainability. Understanding and leveraging your financial metrics isn't just about survival, it's about setting the stage for growth and opportunity.
.jpeg)
