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19 March 2021 | Minutes to read: 4

Startup finance: Six tips to get it right

By Nick Kenny and Karly Whitehead

For your startup to succeed, robust financial management is needed to help you clearly pinpoint how much cash you’ll have and need in the future. This will not only create stability, but it will put you in the best position to determine how your startup will achieve its vision, strategic goals and objectives.

Here are a few tips that will boost your startup’s financial health.

1

Don’t start without a strategy and SMART goals

  • You need a vision and direction for the whole business. It sets out how you will achieve your goals and what capabilities you need to help you grow.
  • A good strategy will guide your investment decisions and tell you where and how you need to spend your money.
  • It allows you to look at future risks and develop contingency plans to overcome these obstacles.

Tip

When setting your strategy, consider using a framework like SMART (Specific, Measurable, Achievable, Realistic, Timebound) to help you identify specific benchmarks and goals. This is a tested set of criteria that will help stakeholders stay on track and engaged. It can also act as an alert to forewarn you of any issues that require you to make changes.

2

Every startup needs a business bank account to track business finances

  • It will track and help control your business expenses and income, keeping them separate from your personal finances.
  • It gives you a centralised source of data to help ensure you meet your tax and reporting obligations.
  • You can use it to figure out if you’re eligible for R&D financing and other incentives.

Tip

Be aware of additional fees attached to different business bank accounts. When shopping around, be prepared and calculate how much you expect to deposit regularly and have an idea of what your expected daily balance.

3

Don’t go it alone, there are affordable and effective solutions that can help

  • Accounting software will give you an up-to-date view of your cashflow and can be mobile friendly to allow you to manage your finances on-the-go.
  • Solutions like Xero and QuickBooks have additional services that can automate tasks like invoicing and reporting and manage admin tasks such as staff leave.
  • Most software will sync with third-party apps including bank feeds and may also have access to free resources such as Hubdoc (document management).

Tip

Your business priorities will influence what software will best fit your needs. Do your research and explore which offer free trials without locking you into lengthy contracts or have hidden set up fees. Our clients use different systems such as Xero that offer a payroll management system and various add-ins.

4

Cashflow is more important than profit

  • Keeping an eye on your cashflow will prevent any financial issues sneaking up on you.
  • Develop a realistic cashflow management plan that can track day-to-day operational expenses and give you a runway until the next cash injection is needed.
  • Be prepared for the up’s and down’s. Depending on what stage you’re at (rapid growth or development loans) you will see different spikes in your forecast.

Tip

Good cash management will help you understand your break-even points and help you set the benchmarks to get there. There are a range of cashflow templates available or you could consider outsourcing or using a Virtual CFO service.

5

Be diligent with your financial records and management habits

  • This is one of the best ways to show investors and stakeholders how the business is going. Save yourself the headache and make it a daily activity to track your business’ health.
  • Clean, reliable records will improve your chances when you apply for grants, government funding or loans.

Tip

You may already be using an excel spreadsheet to record your financial records but be open to accounting software. It will save you time, provide accurate financial dashboards and give you a complete picture of how money is flowing in and out of your business.

6

Know what grants and assistance you can access

  • Cash is one your most valuable assets and government grants can be a great way of accessing funds without having to give away equity.
  • There are various government grants available for a range of different activities, which can be a game-changer for your startup.
  • The MVP Grant and R&D Tax Incentive are two of the more popular grants accessed by startups. Ensure you speak to an accountant or advisor in the early stages to avoid missing out.

Tip

There are over 300 government grants and assistance opportunities available. Sign up to the right websites and ensure you mark application dates in your calendar, so you don’t miss out. Allow at least six weeks to write an effective application and to have enough time to gather feedback and revise it.

Startup finance: Six tips to get it right

Nick Kenny

Nick is a Director in our Business Advisory division with a wealth of experience on how to use accounting systems to drive business efficiencies. Supporting clients across a range of sectors, he's expertise includes review of legacy systems, providing advice on new technology systems, virtual CFO applications and conversion of accounting and business software to cloud based programs.

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Startup finance: Six tips to get it right

Karly Whitehead

Karly is a Manager in our Business Advisory division with vast experience in providing business advisory services ranging from virtual CFO services, business strategy advice, process review and implementation, implementation of new accounting systems and standard compliance.

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