Budget is one of the most essential components of running a startup. It's important not only for planning your next move but also for doing budget vs actuals analysis. As a startup owner, you have a vision which combined with a good accountant can help you prepare a great budget.
Below are 5 business budget tips for startup owners that can help you up to your budgeting game
Make a comprehensive plan
Running a start is cumbersome. There are innumerable elements you not only need to foresee but also take into account for. Be it unstable revenue, savings, outcomes, cash flows, or your overall strategy. Take some time to ensure that your budget accounts for some of the following bits. (this list is not exhaustive)
-Unstable revenue seasons in our business
-Emergency financial situations. A sufficient cash position will keep things smooth
- Supply chain failures or bumps
-Accounts receivable slowdown
-Delayed vendor payments
-Last-minute fines etc
Invest in accounting software
Do an honest review of the time you spend on budget management. Is it stripping you of energy to focus on your core tasks? If you are a small business then you may start with a simple expense management software or a budget management app. This will keep a good track of your expenses. Simple organization and automation will give your startup a sturdy foundation to build on.
However, if you have expanding operations or you're spending way too much time on making your budget, then you must outsource CFO services. Outsourced CFO services can help your startup build a tailored budget. You will know what needs to be implemented and worked on right away. The software will only provide you with the platform, but CFO services will also bring in critical thinking.
KPIs and enhanced insights
Key Performance indicators help your measure your performance. The essential part is deciding what KPIs are relevant to your business model and industry. An outsourced CFO can also help you with this research. some of the common KPIs are listed below.
-Return on Equity
-MRR and ARR
-Accounts payable and Accounts receivable
A plan will list all the long-term and short-term goals. That being said, reviewing those is essential to keep a track of where you stand. Quarterly reviews should be a priority as they analyze the performance within shorter intervals. If a quarterly review is a bit too much for your startup then go for an annual review. This helps in studying any incremental and gradual changes in your company's financials.
Covid-19 taught us all a huge lesson: plan for the unexpected. Planning for the worst is reasonable when it comes to business. Ensure that you have a plan for situations such as unexpected seasonal swings, supply delays, production failures, supply chain mess-ups, or even a pandemic. Remember, cash will always be your best friend. Maintaining a smooth cash flow or keeping extra cash will strip you off worries you have no control on
An outsourced CFO is the best bet for an early-stage high-growth startup. An investment made in the early days will get you enough ammo to deal with the business's ups and downs. Furthermore, if you plan to raise money, angel investors and VCs expect you to have organized and clean financials. Your product ideas could all go down to waste if you cannot prove your plan's financial feasibility.
Still, wondering where to start? Let's chat today to see how we can help you streamline your financial projections. From company financials, to payroll to taxes to holistic HR management. We got you covered.