Across the U.S. thousands of new companies are opening their doors. These startups are eager to grow and establish themselves within their industries. Despite their optimism and unique business plans, many of these new companies will fail within the first few years. While you can’t guarantee success, one of the best ways to stay afloat is to keep up with your finances. Follow these essential tips to keep your books in order.
Learn the basics of bookkeeping and accounting.
You do not need to be an accountant to run a business. Plenty of companies that succeed on the NYSE and are featured in Bloomberg are run by people who have a clear vision, not necessarily a finance degree. That being said, as an entrepreneur, your job is to know everything about your company. You need to know why your marketing team is creating content and what documents your legal team creates.
Find a few finance websites that you can trust to learn the basics of bookkeeping. Investopedia has multiple pages and definitions that you can follow. The team at Wealth Rocket also creates guides to learn about finance basics. Growing your financial knowledge can help you make smarter accounting decisions.
Establish good habits from the first day.
Even if you only have a few customers, you need to keep good books and establish clear bookkeeping habits. In fact, it’s much easier to establish policies the first time you work through them. This way you won’t need to go through a backlog of invoices and transactions to adjust them to your new system.
Meet with your team members and review your processes for logging sales and managing inventory. Your process should provide clarity into where your money is coming from and where it is going. As your business grows, you can use these processes to generate reports on your net income and other success metrics.
Focus on the big picture of your company.
Too often, U.S. business owners are “penny smart but dollar stupid,” meaning they make small decisions to save money that cost them in the long run. For example, cutting corners in service can turn customers away. If you want to improve your finances, consider how you look at your numbers. Do you obsess over sales from last week or do you review your performance quarterly? Do you micromanage your team members to give them clear budgets to work with?
While it’s important to be involved in the day-to-day finances of your company, you need large-scale processes in place to grow your revenue. It’s easier to overcome small financial challenges when your overall financial health is strong.
Create a board of directors.
If you have multiple investors or if you ever want to go public through an IPO, then you need a board of directors. This is a group of people outside of your company who want to make sure it succeeds. The board will review major investments, request reports on your current market share, and review your finances from the last year and quarter.
Adding a board of directors can help your finances by holding you accountable. A lot of people think starting a business means no longer having a boss. However, there are benefits to having a team of business professionals that you need to answer to.
As a business owner, you aren’t just responsible for your own finances. You are responsible to your team members, investors, and board of directors. Every company on the NYSE is responsible for caring for shareholders and employees that work for them. Good finances can’t guarantee success, but they promote transparency and accountability in business.