Starting a business in the middle of a pandemic may seem like a weird idea. The pandemic has forced several businesses to close down. So you might be wondering whether opening a new business right now even worth the shot.
The answer is yes, and many definitely think the same. In fact, so far this year, there were 3.2 million applications for new businesses.
But launching a startup is a huge endeavor, one that demands many things to survive. And these include financial management. Here are some things that you need to do to keep your new startup afloat financially.
Have a Defined Business Plan
Before getting started, you need to have a specific business plan. You have to define your goals, target market, and so on. A strong business plan can help you find investors and lenders. The plan will prove that you’re serious about your business and that it has potential.
A defined business plan also helps you avoid unnecessary expenses. For instance, let’s say that you were to advertise your products on their first launch. You would have a clearly defined niche because of your business plan. As a result, you would only need to shell out a certain amount for your promotions that target your specific niche, instead of spending more for a general market and getting no return on your investment.
Set Clear Boundaries
You need to ensure that you detach your personal expenses from your business expenses to keep your finances organized. For instance, you will find it easier to track your taxes and avoid any issues regarding your personal liabilities.
And by separating these expenses, you can see the development of your business credit. This is important if you aim to secure large business loans in the future since your business credit will show your financial responsibility.
One thing you could do to separate personal and business finances is by opening a separate business checking account, instead of using your personal account for your business finances.
Track Your Cash Flow
Tracking finances in a business requires the holy trinity: a balance statement, a cash flow statement, and an income statement. The balance sheet shows your assets and liabilities. By keeping an accurate record of these two, you can avoid acquiring things you already have. This document also helps you keep track if you can still manage your debts and continue operating.
Next, a cash flow statement shows the ins and outs of your money, whether through the acquisition of assets, payment obligations (e.g. rent), and so on. This statement will help easily analyze the financial state of your business.
Lastly, an income statement shows your profits and expenses. This is a good way to assess the profitability of your new business.
By having all of these three documents, you can analyze the financial flow of your company and make necessary changes to reduce your expenses and save money.
Take Advantage of the Latest Trends
You can also take advantage of the latest technological trends to manage your finances more efficiently. For instance, one popular trend is automation. Basically, it refers to performing tasks with minimal human assistance and dependence.
Many industries apply automation in their process. For example, some methods of insurance marketing are fully automated, like email and social media marketing. In health care, setting appointments and appointment reminders are now commonly automated.
Adopting automated processes in your startup, where possible, can save you a lot of money and time. Manual processes are often time-consuming, and time lost is money lost. So automating processes will save you time so that you can do other urgent things instead.
Get the Right Team
Having the right manpower to manage the finances of your business will make a huge difference. This is especially important if managing finances is not your expertise.
This team should include the following experts: a bookkeeper, an accountant, and an auditor. The bookkeeper will be responsible for logging financial transactions. Meanwhile, the accountant will review and analyze these financial records. Then, they will generate reports that will be your basis in making sound financial decisions for your startup. The auditor will then check the accountant’s records for any discrepancies to avoid further financial issues in the future.
Starting a new business in the middle of a pandemic can be difficult. A few years ago, it was said that nine out of 10 startups fail. Still, there are many business opportunities that your startup business could fill. As long as you stay dedicated and manage your finances properly, you’ll be able to push through.