When you begin to run a startup you’re going to have to wear many hats, and one of those is as that of an accountant and financial manager. If you have little or no experience in dealing with accounts and finances in the past then it may seem a bit daunting, but when you boil it all down there are 5 key rules that you should follow:
1) Keep your personal and business finances completely separate
Always remember that your startup is a business and its finances should be managed as such. Even if you are self-funding your startup, you should start a separate bank account and place the capital in it, then track and differentiate between business and personal expenses.
2) Create a realistic budget that includes contingencies
If you don’t already have a budget, you need to come up with one – fast. That budget should include all your capital expenses as well as other fixed costs, overheads, and so on. Based on those expenses you should be able to calculate your ‘burn rate’ and estimate how long you can run your startup off your capital alone. Just remember to include contingencies in your budget, as you never know when additional expenses may crop up.
3) Keep your budget lean and avoid unnecessary costs
When you first start out you are going to find that your budget is fairly tight, which makes it all the more important that you keep it as lean as possible and get rid of any unnecessary costs. Only spend on necessities and keep your costs as low as you can so that you can stretch whatever capital you have for as long as possible.
4) Expand carefully and in the right places
Many startups tend to expand too fast, which incurs additional costs that the startup may not be ready to cope with. Whenever you are planning to expand in any way, make sure that you will be able to sustain it by factoring in the additional expense into your budget. Also be sure that you are expanding in areas that can help to generate the most revenue growth – at least when you start out.
5) Get help if you really need it
As much as you are going to have to wear many hats, if you find that you are having difficulty managing your startup’s finances then you should get help. Odds are you won’t need to hire a full time financial manage initially and may be able to get someone on a part-time or freelance basis.
That should cover most of the bases, though it should be noted that if you have any debt it is important that you manage it so that the interest payments don’t spiral out of control. In some cases you may want to consolidate credit cards to make it easier to deal with, so you only have a single repayment to make. When you are running a startup the last thing you want is to be buried under a mountain of debt, as that could affect your startup as much as your personal finances.