The financial challenges of the beginning of a new venture can be overwhelming. Understanding the most important terms in finance for startups can help you make educated decisions and effectively manage your resources.
Basic Bookkeeping: Keeping accurate records is the base of financial planning. It’s a must for any startup seeking to obtain funding from investors or lenders. This includes GAAP accounting that is compliant with GAAP (income, expenses), cash flow and an account of balance.
Revenue and Costs: Tracking and monitoring the amount of revenue, operational expenses as well as other costs is an important part of financial startup fundamentals. This helps founders of startups manage customer acquisition, customer churn, as well as revenue growth. It also helps them understand the effects of pricing of customers and product features, as well as other variables on their bottom line.
Financing: Startups depend on personal loans and credit cards to fund their operations. This option can be costly and risky for startups, especially when the company fails pay its repayment obligations. Alternative sources of financing for startups include business lines of credit, equipment leases, and crowdsourcing platforms.
Cash Flow: A startup must to be able to forecast its cash flow at any point in time. This can be difficult for startups that pay annually or in arrears according to usage, and aren’t able to provide an accurate picture of their cash balance over time. Startups can prevent cash flow issues by streamlining the process of payment and ensuring vendor payments are made promptly, and accurately recording ownership equity.
