When you think about a start-up business in California, there are a plethora of things that you need to take care of. Right from forming a business idea and getting the funding to start it – you have to focus on every business operation to get fruitful results.
You might be an expert in designing successful business models, but if you fail to manage your finances of business tasks – you could see a downfall of your start-up in the near future.
For big businesses in California, financial management might not be an issue as a dedicated team and manager control the finances. They keep track of the profits, and if there’s an issue, they can immediately resolve it after reporting it to their higher officer.
On the other hand, in start-up businesses, you might not have the luxury to appoint a team as it could be an extra investment. And you might not have the budget for it. So in such a case, you have to know a little bit about financial management so that your business grows into a successful one.
Financial Management Tips For Start-up Businesses In California
Learning about managing your finances will make you avoid the common mistakes that many start-up owners make. It means you not only get good IT returns, but you also have enough money to implement new ideas in your business.
So, learn here the financial management tips that a start-up owner in California must know to enjoy a smooth-sailing business:
1. Open a dedicated bank account
Before starting your business, open a dedicated bank account in California that you use only for your business transactions. Using your personal savings account might sound easy and convenient, but it could soon become cumbersome at the time of filing your taxes. You would have a hard time separating the transactions of business and your personal use.
If you’re not vigilant or unable to identify which transaction is for what, you could lose out on deductions that are otherwise very profitable to you. Also, when customers pay you to your business account, it seems more professional rather than money crediting to your personal account.
Hence, always open a separate bank account to maintain the money of all your business transactions.
2. Save all the receipts
In other words, saving receipts means keeping track of all the financial records you do related to your business. You will be having lots of invoices, receipts, bills, and other paperwork that determine your financial history. Ensure you create a proper system to access these bills whenever needed.
You can easily find the bills when you feel there’s something wrong with your business. Keeping a financial record will help you during tax filing so that you don’t lose out on deductions and claim everything you can get back. It’s possible only when you have every single receipt of your business.
One of the best ways to store all your receipts is by using cloud technology. No matter where you go, you can access all your records. It’s one of the benefits that will make you switch to cloud accounting.
3. Monitoring your cash flow
Cash flow is the process of your money coming in and out of your business. All the payments that you make and the money you receive from your clients come under this cash flow.
You must always make sure that your expenditures are less than the money coming into your account. It means your business is running in profits. It only happens when you pay close attention to your invoices and other cash receipts. So, make sure you always have a positive cash flow by:
- Sending invoices immediately
- Monitoring your debts and savings
- Borrowing money only when you need it
- Cutting expenses whenever needed
- Keeping track of the client payments
When it comes to paying invoices, you don’t need to do it early but do it before the due date so that you can preserve the cash flow.
4. Building great relationships
Financial management is not about only the cash flow and bank transactions. It also means when you get business from the network you build from the beginning of your start-up.
You have to develop great relations with your suppliers, clients, and all those people who do good to your business. When you neglect network building, your business can fail as you don’t get enough customers to keep your business afloat. So, always keep the right people close and think about the advice they give you.
5. Preparing financial projections
Set yourself a financial goal at the start of the year and work towards achieving your objectives within the budget you set in the goal.
To make it possible, plan quarterly reviews of your finances so that you can know that’s everything is in order. After the first financial year, you can see whether you’ve completed all your goals within the set budget.
This entire process is called financial projection and it helps you to notice the ups and downs of the business transactions. It lets you know what precautions you have to take for the next financial year to overcome the negatives you might overcome in the previous financial year.
Another major advantage is that you can highlight the areas that are problematic in terms of finances. It will let you find the solutions early so that you don’t face any losses in future.
6. Hire an accountant
Hiring an accountant in California or a dedicated financial team might be a heavy investment. However, make sure you do it if you’re absolutely no good with the numbers. You might be good with dealing the personal finances, however as a business can have multiple and complicated transactions, you need to be vigilant and thorough with the numbers.
So, it’s best to hire an accountant who can look after your finances, losses, profits and taxes. You can get a clear picture of what’s happening in your business as the accountant will report to you the timely updates. It’s one of the best benefits of hiring an accountant for your business.
So, these are the few financial management tips that you need to know and implement before starting your business. They help in keeping your money rolling throughout the year and have more customers benefitting from your business.
Erika Rhein, a professional writer, and blogger by profession. I write on various niches; however, I prioritise writing on the automobile, home improvement, lifestyle, etc. I always strive to provide users with useful and informative articles in a readable format. I aim to achieve a difference through my writing.