According to CPA Practice Advisor, only 40% of small business owners feel they are knowledgeable on finance. And unfortunately, the lack of knowledge in how to properly manage money catches up with business owners.
A challenge faced by startups involves acquiring enough capital. Many businesses accomplish this task by acquiring investors. However, with so many startups competing for investments, this can be a challenge.
Access to Funding
One of the best ways to bring in capital is to create a solid business plan and clear, concise financial records that you can show to potential investors with an interest in the company.
A steady cash flow ensures that you have what you need to hit the ground running. On the other hand, if the cash leaving your company exceeds the cash coming in, you are going to experience problems
Inconsistent Cash Flow
To minimize expenses, look for ways to reduce debt payments and/or lower the cost of inventory. To maximize revenues, invoice your customers as soon as possible and establish a clear, effective procedure for collecting accounts receivable
Startup businesses are overwhelmed with financial information. Keeping track of this, allows the business to optimize cash flow, pay taxes on time, evaluate the success of the business, attract new investors and accomplish other important tasks.
Keeping Track of Financial Information
To deal with this accounting challenge, small businesses need to invest in software to help them keep track of important financial information. Alternatively, startups can also delegate these responsibilities to a third party accounting service.
Accurate payroll is essential in order to avoid unexpected expenses, tax complications and other issues. However, establishing effective payroll procedures is often a challenge.
When start-ups don’t have the ability to handle this task in-house, outsourcing payroll to a third party is the best way to avoid problems.
Combining financial accounts can be problematic in the long run because you can mix up your funds and miss out on tax deductions. If your business does get audited, the mixing of your financial accounts could quickly become a nightmare.
As soon as your business kicks off, find a way to separate accounts for every area of your finances, and never mix your personal and business accounts.