Reasons Why Startups should Consider Focusing on Financial Management

fund management

Ultimately it all boils down to one thing and that is money. Start up is a business and the main purpose of a business is to make money. Be it a social venture even then that community has to be provided with a job that earns them money. Basically it is all based on a profit and loss model. A start up begins when a fresh idea pops into the mind. Though most of them fail because of improper management of funds. It is very difficult to strike a balance between optimism and prudence when it comes to financial management. But it is something which cannot and should not be taken lightly as it is the major factor of sudden ending of startups. A mere five hundred word long article that keep coming across your working screen might not arouse the fright in you. Alas! People learn only when they fall. But those of you out there who understand the importance of financial management in startups, do converge more of your focus on it. For the rest you, this article calls for a brief reading.

  • Condition of your startup

The financial plan of your company acts as the navigator in hard times. It provides a structure according to which the company runs and manages its finances and funds. At times when you are stuck in the middle of nowhere, in the no man’s land of the business and corporate world, this financial structure will give you direction, act as compass and navigate you around the abyss. Health of startup is checked by the management of the finances. It is thermostat of the core of the company. Now it is necessary to have a thermostat to measure any ups and downs. Suitable steps can be taken only after detection of the problem.

  • Management of funds

The biggest challenge one faces while starting a new venture is finding a source of funding. Off late startups fund themselves through internal cash flows which has led to the synonymity of the terms funding and startup. They are no longer very different and distant from each other. Managing the finances becomes very crucial here because once you find an investor the aim is to cover the cost of only one round of product development and hope to make the second round through the earnings of the first one. Optimization of funds is extremely necessary. The money provided by the investors should be used for further growth only. The success of a business lies in its sustainably.

  • Resource optimization

Startups mostly begin on a shoestring budget. With such limited funds comes the limitation of resources. This limitation calls for the optimal usage of resources. The resources should be carefully exploited to their full extent and not damaged. Financial management allows you to segregate funds for resource allocation. Before investment startups should weigh in the risks involved. Sustainability of the long term can be achieved only by adopting sound financial strategy and budgeting each department separately.

Anum

Anum Yoon is the founder and editor of Current on Currency. She loves all things personal finance, which is why you’ll find her work all over the PF blogosphere.

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