The road to success as a startup company can be a rocky and ultimately insurmountable one for any number of reasons but poor financial management is certainly a common cause of crisis among fledgling businesses everywhere in the world.
Here are some key areas of focus worth having in mind if you are running a startup company and aiming to strike the right balance between prudence and optimism when it comes to financial management and building sustainably for the future.
1 – Define your payment policies as early as possible.
There will inevitably be so much else to focus on if you are starting up a business besides the details of invoicing and chasing up payments. Overlooking these details though can be seriously problematic and, over an extended period of time, potentially catastrophic.
Remember that sales are only of value to your business if your customers or clients follow through on their promises and pay what money they owe you. It’s vitally important for startups and any small-scale business to really nail down their invoicing policies and to communicate them with complete clarity on a routine basis from the earliest opportunity.
The aim should be to ensure that everyone you work with knows precisely how much they will be asked to pay and when you expect those payments to be made. The key is getting into good habits when it comes to sending invoices and chasing payments diligently if they ever end up going unpaid for any reason.
2 – Borrow only what you need.
Life can move quickly in the context of startup operating and when ambitions are high it can be tempting to jump headlong into every opportunity that comes your way. In certain respects this may prove to be a fruitful approach but when it comes to financial management, rushing your decision making can be costly.
This can be the case, particularly when good progress is being made and you’ve been successful in opening up access to loans or to the financial backing of any kind. An idea worth having in mind in these moments is that it is generally more prudent in the longer term to borrow only what money you need rather than what money you have been offered access to.
Turning down offers of credit or of financial backing can seem counterintuitive and somehow as if it demonstrates a lack of ambition but doing so can often help startups to maintain growth at a pace that ultimately proves more sustainable and better for business.
3 – Don’t ignore the details.
Managing a startup company is a stern challenge of even the most experienced of business brains, not least because it requires oversight of such a wide variety of different operational elements and therefore an array of different skillsets.
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