In making a startup, you have to have control in your finances in order to survive in the industry. However, everyone in the startup industry knows how hard it is to control and maintain operation below budget. With the unexpected events that can occur anytime, it can be quite impossible to predict what is going to happen. This is why our Ideabox team decided to provide five tips to keep in mind when managing your finance for your startup. Although you won’t know exactly how the future of your startup’s finance is going to turn out, you can still minimize the leaks in your cashflow and optimize your resources. 1. Don’t overpay your taxes! Every business has to pay taxes one way or the other. However, you have to be careful in overpaying your taxes. One of the most common mistake we noticed that some startups overpay their taxes. This can occur because of the complication in the tax codes and system or mismanagement of their expenses. Another reason to overpay your taxes might be due to ignorance in the benefits for startups that are still unable to make revenue. Therefore in order to prevent this mistake, our solution for you is to keep all receipts and hire an admin to ensure that all expenses are accounted. This solution can help you organize your finance so that you can file tax return claims and hopefully reduce your startup expenses. Another solution is to hire someone to take care of the taxes for your startup. If your startup is not ready for one, then hire a freelance or a consultant that can provide service once or twice a year. By doing this you can make sure that you are not double-paying your taxes and you can also be informed of the different benefit programs your startup can apply for. 2. Forgetting about your Budget When your startup is going well and you are aggressively competing against your competitors, it can be very easy to get distracted and spending more than your budget bracket. Especially if your competitors are established corporations, be careful not to be blinded by their extravagant spending and attempt to follow their spending behavior.
Because you are a startup, you have to be more concern about your budget and choose your fights. Learn how to spend strategically and maximize the utility for each investment. Always think about profitability of your startup and whether the things you are spending are efficient and mandatory. Remember sometimes less is more, therefore spend less and optimize more in your spending. 3. Beware of Impulse Spending Similar to shopping, starting up a startup can lead to impulse spending. Especially if it is your first startup, due to the excitement of the experience you might indulge too much in spending your capital on recruitment and office space. Starting a startup is not a vacation trip, you have to spend as if you might not survive tomorrow. You have to scrutinize all spending and spend only if you know it’s mandatory for your startup to have for its survival. 4. Be careful of Diversifying too Early Be careful in being too ambitious. When your startup is in a great productive trend, one might believe that it is a great time to diversify on their product or service. This is another common mistake that startups make. However, founders have to realize that trend can change any time. Therefore if you want to diversify on your startup’s product or service, make sure the current state of your startup is already stable and at least have met break-even point. Don’t make the mistake in diversifying too early as it may become your startup’s highway to doom. 5. Be careful in Confusing Being Busy with Being Productive This is common mistake also applies outside the startup world. Many individuals mistake being busy with being productive. What is the difference between the two? Being busy does not correlate to being productive, vice versa. You can be busy yet not being productive because (1) you are not working efficiently and/or (2) you are busy with things that you don’t need to do. It is better to be productive rather than being busy because if you are productive then it is more likely that (1) you are more organize and had work efficiently, (2) have a better mental and physical wellness due to less stress and (3) have more time to do more productive things. It doesn’t matter how
much you work if you don’t work smart. Here are some related articles that may interest you. 5 Types of People You Need to Have in Your Founder’s Team 5 Reasons to Not Make A Big Launching Event 5 Things You Need to Create Your Dream Startup 5 Ways to Meet Your Potential Co-Founder(s) 5 Traits to Look For in Your Co-Founder(s)