Best Ways to Manage Your Startup Finances
An inability to manage their finances is the main reason why the majority of Australian startups eventually fail. Regardless if they’re unable to reach their break-even point in time, fail to meet the market conditions they’ve anticipated or don’t have the funds to run day-to-day operations, it all comes down to money. Now, one of the biggest misconceptions about this lies in the idea that this is all due to the inability of the company to make enough money (profit). Nonetheless, more often than not, it’s the expenses that are the real issue, not the income. With that in mind and without further ado, here are several ways in which your company can manage your startup finances in a much smarter manner.
1. Buy supplies in bulk
The first thing you should do in order to manage your finances in a much smarter way is to buy your supplies in bulk. The way in which this works is fairly simple, by ordering a larger bulk of office supplies or supplies necessary for the manufacturing of your products, you’ll be able to save quite a bit of money. Moreover, you can do so using the money you currently have at hands, instead of burdening your office with several subsequent, smaller payments. Either way, buying supplies in a bulk is a smart move, provided that you make the right arrangement with your supplier and that you have the ability to pay up front.
2. Go paperless
There’s an interesting statistic that an average office user prints an average of 10.000 sheets of paper every year. This is a massive figure, even if you count only the paper and completely disregard the printer ink used in the process. Aside from this, you could also add the power-bill boost that comes from such an excessive use of the printer as the appliance and what you get is a massive money waster. We deliberately used the word waster, seeing as how, in the digital era, you don’t actually have to go down this route. Going paperless is both greener and more frugal.
3. Encourage your customers to pay in cash or with a credit card
The next thing you should do is encourage your customers to pay you right away. Some of the heftier payments will have to come in credit payments as account receivables (invoices). This creates a certain problem since A) you have to collect your money and B) on paper, you have the money that you can’t actually use (yet). To avoid this, you need to incentivize cash and credit card payments and the way you do this is completely up to you. Offering a discount, nonetheless, is the most commonly used method.
4. Consolidate all your debts
Chances are that you won’t be able to start a business without a loan or two, which might cause more than one complication down the line. First of all, each debt you have has an effect on your credit score, which impacts everything, from your ability to attract investors to insurance policy deals that you’re getting. Moreover, if you have several payment dates, different interest rates and other factors to consider, it’s more likely that you’ll make an error at some point. Therefore, looking for agencies dealing in debt consolidation in Australia might be the right choice for your business. In this way, you get a single outcome to focus on (at least when it comes to debt) instead of several of them.
5. Role-play having a smaller budget
Sometimes, it’s hard to make priorities, when it comes to your spending. In order to successfully deal with this, you need to try out a technique known as role-playing. Here, you would have to imagine what your company would look like if you had a substantially smaller budget (which might be quite hard to imagine), or no budget at all. There are so many DIY techniques and free options for you to choose from that you just might make it. Even if this may not be completely realistic, after all, running a company without any funds is impossible, it will at least give you several great ideas.
6. Go with open source alternatives
The next thing you should consider is the open source alternatives to software that you’re currently using. You see, there’s a myth about premium software being superior, when, in reality, it’s all about the power of habit. The fact is that MS Word is more widely used than WPS Office Free, LibreOffice, Apache OpenOffice is probably the No1. reason why so many companies use it, in the first place. Now, with the rise of Google Docs, there’s finally an alternative that matches Word not only in its functionality but also draws close to it in overall popularity and renown. Needless to say, this can save your company a small fortune over the course of the year.
7. Create an emergency cash supply
As soon as get some profit from your startup, you’ll feel under pressure to invest it back into your company. While this is undeniably a good idea, moving to a bigger office, hiring more people or purchasing better equipment is not necessarily the right investment to make. Sure, this will increase your productivity and future-proof your business but what if this increase in workload is just a lucky fluke? One of the smartest ways to invest your startup’s first profits is to create an emergency cash supply. Needless to say, this is an investment that can’t fail. In fact, it’s an investment that’s there to act as your safety net and save you from, what would otherwise become a certain failure.
At the very end, managing your startup finances takes some outside-of-the-box thinking, due to the fact that some of the above-listed suggestions may be counter-intuitive. For instance, buying new equipment as soon as your workload increases may be the logical thing to do. On the other hand, planning the money-less scenario might not come as natural to you. Either way, the above-listed seven tips may seriously increase the odds of your startup.