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Financial Startup Basics

The financial complexities involved in the beginning of a new venture can appear overwhelming. Having a clear understanding of important financial terms for startups is essential for making educated decisions and effectively managing resources.

Basic Bookkeeping: Accurate recording is the foundation of financial management. It’s a must for any startup hoping to raise funds from investors or lenders. This includes GAAP conforming financial statements (income and expenses), cash flow and the balance sheet.

Revenue & Costs – Tracking and monitoring operational expenses, revenue as well as other expenses is a key element of the financial startup fundamentals. This helps startups control the acquisition of customers, customer turnover and revenue growth. It helps them understand how customer pricing products, features, and other factors impact their bottom line.

Financing: Many startups rely on personal loans or credit cards to finance their operations. This method can be costly and risky for startups, especially when the company fails to meet its obligations to repay. Alternative financing options for startups include business line of credit, equipment leasing, and crowdsourcing platforms.

Cash Flow: Startups need to be able to forecast its cash position at any moment. This isn’t easy for companies that invoice annually or in arrears based upon usage, and aren’t able to provide an accurate picture of their cash balance over a time. Startups can prevent cash flow issues by streamlining the process of payment, making sure vendor payments are processed in a timely manner, and accurately recording ownership equity.

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