Top finance tips for startups
By Emily Chantiri
Starting a new business is an exciting time for anyone. Savvy business operators understand that keeping track of the business finances is just as important as the idea behind the business.
The foundation behind any successful business is not just about the idea - it's the passion, the people and the profit.
1. Ensure proper financial structures are in place. Keep abreast of your financial accounts; monies in and monies out
Before you're ready to start a business, firstly consider the right financial structure for your business needs. This includes costs of meeting the administration and reporting requirements, asset protection, insurances and tax implications. It is very important to have the proper accounting procedures in place, as sloppy account keeping is one of the main reasons businesses go bankrupt.
2. Pay yourself, staff and suppliers each month
If you plan to do your own bookkeeping, invest wisely in accounting software. Otherwise, employ an accountant or bookkeeper. Ensure you have the funds to pay your staff, suppliers and, above all, yourself. A common mistake business owners make is not paying themselves. Instead, they invest all the monies into the business. Should the business then fail, they have nothing to show for it. However, if they continue to pay themselves and continue their superannuation contributions, they won’t be left high and dry.
3. Don't overcapitalise
Another common mistake new business owners make is overcapitalising in the business. Research conducted by the Australian Bureau of Statistics found that of 316,850 new business entries in 2007/08, 71.5 per cent were still operating in 2009. A year later, this had reduced to 56.8 per cent and in 2011, 48.6 per cent were still operating, suggesting that just over half of new businesses in Australia fail within four years.
4. Hire good people
Good employees are worth their weight in gold. Employ people who are as passionate about your business as you are. In almost every successful business, whether it's big or small, if the employees love their job, you'll find the company does well financially.
5. Establish a relationship with your bank
There will be times when you'll need a loan or an extension in your line of credit. A solid relationship with your credit provider is another financial asset to your business.
Starting a small business is a steep but rewarding learning curve - what finance tips have you picked up along the way?
Australian Bureau of Statistics, 8165.0 - Counts of Australian Businesses, including Entries and Exits, Jun 2007 to Jun 2011