Financial management in startups 

What is a startup? Even tough it feels logical to think that all small businesses are startups, that is certainly no a fact. Startups are companies that are made in the purpose of scaling up and having a skyrocketing success that in the end makes a lot of money for the founder. A lot of times startups have either a completely new innovative product that they are bringing out for completely new markets, or then they may try to disrupt already existing businesses by doing a certain thing better than the other competitors are doing. These startups usually require a big amount of funding or some type of capital to get the wheels rolling in the company. So startups differ from other small companies with the thought process of aiming to scale up and doing it quick. (Abbas) 

Startups are constantly in the eyes of the business world and in the eyes of business investors. There is constantly new startups coming up trying to make their way to the business world and trying to make a living for themselves. But in addition to that, these startups are constantly going trough financial problems which is basically a make it or brake moment for these startups. The startup either works and starts generating good money for the owners and people working on it or then the starup is not able to capitalize their potential and they are not able to make money from anywhere which ends up in the startup going to bankruptcy and failing. (Abbas) 

Startups come across many financial problems in the first months/years when they are still trying to grow in the business world. The managing of their financials is not the same as it is in the normal companies. In startups the decision that are made regarding the finances is way bigger than the normal companies. The startups need to be constantly aware of the fact that where is the money of the company going, how much of it is going while also making good decisions with the finances so they don’t spend too much in places were it is basically useless. Because startups don’t have money to waste, the decision that they are making regarding their money are more crucial than for the normal companies, because one wrong decision can take the whole startup down. (Abbas) 

The financial management of a startup starts understanding the cash flow of the company, this means understanding on where money is going and where they are getting more of it also. This understanding can also mean for example understanding how much certain things require money from them like recruiting a new employee. Another thing that makes the financial management easier is making a budget for the company and then trying to keep up with it. The budget helps the startup to keep up with their expenses and where their money is going. A budget also helps the company to prepare for expenses that are expected in the future, so they can put money to the side for the upcoming expenses. The last and the most crucial thing is investing smartly. Investing should always be made with clear thought and you should be aware of what you’re investing in. The company should calculate the risks that each investment has and then putting the money to smart places. This helps the company to protect themselves from big losses from sor example stupid investments. (Abbas) 

To conclude all of this it is clear that financial management is a really crucial part of every startup companies start and growth. With proper financial management you can really lift up the probabilities of your startup really succeeding and being profitable at some point, and even hopefully making you a big amount of money in the end. With the properly management of the financials the company can minimize the amount of the money going to “Waste” and in the same time maximize the amount of money that they can invest back to the company to make it better.  

Sources : 

Abbas, S. Financial Management in Startups : The Biggest Challenges and Tips. Read on 3.12.2023. https://oakbusinessconsultant.com/financial-management-in-startups/