Posted by Pamela Swift in Finance & Capital
Article Contributed by Aline Vedder of Spotcap
Good financial management can mean the difference between setting your business on a course for success and watching it become insolvent. Spotcap has compiled a checklist with the most crucial advice for successful financial management.
- Keep up with your finances
Small businesses often lack a clear overview of their daily, weekly, and monthly numbers and financial trends in their organization. Solid cost accounting is crucial to track your company’s cost and the basis for getting a clear view on your cash position. Understanding your liquidity position is paramount to managing your finances effectively. Spend the necessary time keeping track of your cash position, and if you lack the financial skills, hire an accountant.
- Take advantage of government incentives
Most countries offer some form of incentive to attract and foster startups; however, these benefits may vary from country to country. Ireland, for example, has attracted many European companies with grants, a low corporation tax of 12.5%, seed funding, and tax reliefs. Startups should contact their relevant government agency for information on the financial support available to them. It is well worth going through the lengthy registration process for a government grant, because this can be a crucial first source of financing.
- Seize different funding opportunities
The reality is that most SMEs will experience financial turbulence at some point and struggle to expand their business. Many studies report that access to financing remains one of the most critical, if not the foremost, constraint faced by SMEs. However, online platforms and financial technology have fundamentally changed the application process for loans. Small business loan platforms, crowdfunding, and angel investors enable entrepreneurship at an early stage. Leverage the opportunities of short-term loans to seize investment opportunities.
- Keep costs low
You received funding? Congratulations! The work doesn’t stop there; it is important to remain cost-efficient and invest the funds you have strategically. Bill Gurley and Marc Andreessen recently criticized the fast cash burn in the IT industry, which might ultimately lead to another IT bubble. Entrepreneurs should heed their advice and make good use of their funding with good budgeting processes. Having an oversight of your cash position helps you identify where you need to cut costs.
- Use apps to organise your finances
Apps like Expensify, Chargify, and Indinero are simple, useful tools to help you keep your finances in check. With these Apps, you can convert photos of your receipts into neatly formatted reports, manage online product subscriptions, track your current financial situation, and receive budget suggestions for the future by integrating information from your bank and credit card accounts.
- Restructure your debt
Approximately 40.000 small businesses close their doors every month in the U.S., mainly due to the enormous burden of debt they have accumulated. Startups that find themselves in financial straits should try to negotiate preferable terms with their creditors and set up a plan to get out of the debt trap. Additionally, companies should constantly be on the lookout for different financing opportunities to reduce the reliance on single sources of debt.
Spotcap enables small business owners to grow their business by providing fast and flexible financing. The company has developed a sophisticated and dynamic decision process assessing the real-time performance of businesses to grant short term loans. Spotcap was launched in Madrid in September 2014 and is led by Toby Triebel and Jens Woloszczak in Berlin. The team – currently consisting of 35 credit and online experts – plans to expand its service both geographically and across products. Spotcap is backed by Rocket Internet – the world’s leading global internet platform outside of the US and China. Read more about Spotcap: www.spotcap.com