Sitemaps
How We Secretly Lose Control of Our Startups
Should Kids Follow in Our Founder Footsteps?
The Evolution of Entry Level Workers
Assume Everyone Will Leave in Year One
Stop Listening to Investors
Was Mortgaging My Life Worth it?
What's My Startup Worth in an Acquisition?
When Our Ambition is Our Enemy
Are Startups in a "Silent Recession"?
The 5 Types of Startup Funding
What Is Startup Funding?
Do Founders Deserve Their Profit?
Michelle Glauser on Diversity and Inclusion
The Utter STUPIDITY of "Risking it All"
Committees Are Where Progress Goes to Die
More Money (Really Means) More Problems
Why Most Founders Don't Get Rich
Investors will be Obsolete
Why is a Founder so Hard to Replace?
We Can't Grow by Saying "No"
Do People Really Want Me to Succeed?
Is the Problem the Player or the Coach?
Will Investors Bail Me Out?
The Value of Actually Getting Paid
Why do Founders Suck at Asking for Help?
Wait a Minute before Giving Away Equity
You Only Think You Work Hard
SMALL is the New Big — Embracing Efficiency in the Age of AI
The 9 Best Growth Agencies for Startups
This is BOOTSTRAPPED — 3 Strategies to Build Your Startup Without Funding
Never Share Your Net Worth
A Steady Hand in the Middle of the Storm
Risk it All vs Steady Paycheck
How About a Startup that Just Makes Money?
How to Recruit a Rockstar Advisor
Why Having Zero Experience is a Huge Asset
My Competitor Got Funded — Am I Screwed?
The Hidden Treasure of Failed Startups
If It Makes Money, It Makes Sense
Why do VCs Keep Giving Failed Founders Money?
$10K Per Month isn't Just Revenue — It's Life Support
The Ridiculous Spectrum of Investor Feedback
Startup CEOs Aren't Really CEOs
Series A, B, C, D, and E Funding: How It Works
Best Pitch Decks Ever: The Most Successful Fundraising Pitches You Need to Know
When to Raise Funds
Why Aren't Investors Responding to Me?
Should I Regret Not Raising Capital?
Unemployment Cases — Why I LOOOOOVE To Win Them So Much.
How Much to Pay Yourself
Heat-Seeking Missile: WePay’s Journey to Product-Market Fit — Interview with Rich Aberman, Co-Founder of Wepay
The R&D technique for startups: Rip off & Duplicate
Why Some Startups Win.
Chapter #1: First Steps To Validate Your Business Idea
Product Users, Not Ideas, Will Determine Your Startup’s Fate
Drop Your Free Tier
Your Advisors Are Probably Wrong
Growth Isn't Always Good
How to Shut Down Gracefully
How Does My Startup Get Acquired?
Can Entrepreneurship Be Taught?
How to Pick the Wrong Co-Founder
Staying Small While Going Big
Investors are NOT on Our Side of the Table
Who am I Really Competing Against?
Why Can't Founders Replace Themselves?
Actually, We Have Plenty of Time
Quitting vs Letting Go
How Startups Actually Get Bought
What if I'm Building the Wrong Product?
Are Founders Driven by Fear or Greed?
Why I'm Either Working or Feeling Guilty
Startup Financial Assumptions
Why Every Kid Should be a Startup Founder
We Only Have to be Right Once
If a Startup Sinks, Founders Go Down With it
Founder Success: We Need a Strict Definition of Personal Success
Is Quiet Quitting a Problem at Startup Companies?
Founder Exits are Hard Work and Good Fortune, Not "Good Luck"
Finalizing Startup Projections
All Founders are Beloved In Good Times
Our Startup Culture of Entitlement
The Bullshit Case for Raising Capital
How do We Manage Our Founder Flaws?
What If my plan for retirement is "never retire"?
Startup Failure is just One Chapter in Founder Life
6 Similarities between Startup Founders and Pro Athletes
All Founders Make Bad Decisions — and That's OK
Startup Board Negotiations: How do I tell the board I need a new deal?
Founder Sacrifice — At What Point Have I Gone Too Far?
Youth Entrepreneurship: Can Middle Schoolers be Founders?
Living the Founder Legend Isn't so Fun
Why Do VC Funded Startups Love "Fake Growth?"
How Should I Share My Wealth with Family?
How Many Deaths Can a Startup Survive?
This is Probably Your Last Success
Why Do We Still Have Full-Time Employees?
The Case Against Full Transparency
Should I Feel Guilty for Failing?
Always Take Money off the Table

Do You Know Where Your Money Is? 3 Tips to Get Your Startup’s Finances in Order

Matt Wool

Do You Know Where Your Money Is? 3 Tips to Get Your Startup’s Finances in Order

Most startups don’t fail because they lose money. The downward spiral starts much sooner when entrepreneurs let managing their financials fall by the wayside. In fact, a CB 2018 Insights report found that 29 percent of small businesses failed because they ran out of cash, perhaps a result of poor money management by leadership.

Not everyone has the aptitude for financial management. Still, startup owners agree it’s a necessity.

Why your bottom line could bottom out

Over the years, my company has seen a pattern with startups: Just as they hit their stride and growth takes off, they begin struggling with financials. There are many reasons for this paradox, including expanding into new verticals too quickly and failing to acknowledge the financial complexity that comes with a booming business.

Hitting a certain level of growth can be like plunging into Class IV rapids, according to Les McKeown in “Predictable Success.” You’ve moved your startup out of the garage — now the waves of processes and procedures are crashing around you. The nuances and intricacies of your finances can often be the most treacherous. This is, unsurprisingly, the stage where startups sink.

Even a part-time chief financial officer or operations person could make a world of difference. At the very least, get an expert to look at your books. You can find a trusted certified public accounting firm or advisor to assist every month and help ensure your books are kept correctly. They can even guide you through the financial rapids if they start getting out of hand.

A leader with too many responsibilities — or who may have only a rudimentary understanding of basic accounting — cannot properly manage the finances of a growth-stage company. Further, if the numbers and the reports aren’t right, it’s almost impossible for leaders to make informed decisions about any aspect of their business.

While there’s no one solution that guarantees profits, failing to properly manage finances is a surefire way to sabotage success.

3 tips to get a grip on your finances

If you haven’t addressed your financials lately, it’s a good time to tackle the following steps — they’ll help secure your company’s future:

1. Process your process.

Do you have a firm enough grasp of your financial process so you can clearly explain to another person who’s not a financial expert? If you don’t have a financial system at all (or it sounds convoluted when you actually put it in words), that’s a problem. Without a streamlined approach to keeping track of expenditures, income, wages, investments, and more, your company runs the risk of defaulting on its financial obligations.

And it’s something business leaders generally believe in and need. In fact, according to Score’s “The Megaphone Of Main Street: Report on America’s Small Businesses,” 27 percent of entrepreneurs surveyed said seeking financial services was crucial to their business’ success.

While it’s easy for founders to keep everything in their heads when the business is small, this approach doesn’t scale. Growth without a dedicated support system to manage terms, contracts, and invoices is like trying to balance a watermelon on a popsicle stick.

2. Think about yourself.

As the company founder, you get to decide how involved you want to be in your company’s finances. If you are inclined to oversee this aspect of your business, it’s important to be realistic about your level of knowledge. For example, if it’s in the best interest of your company to switch from cash accounting to accrual accounting, are you confident about how to oversee two sets of books or forecast cash profits versus accrual profits?

Many entrepreneurs choose to hire an experienced financial professional to handle that part of the business. Bottom line: You have the power to say you don’t want sole financial responsibility.

3. Create checks and balances.

Once the right people are in place, double-back to your process. To scale your business, have a solid financial operation in place: The earlier you can institute dual checks that create redundancies and safeguards, the better you’ll be.

It’s always a good idea to have at least two people look at any check worth more than $500 as well as require dual approval on any large payment. Expenses should get similar treatment. Acceleration Partners does this at the end of every month: Two people review each client invoice and check against QuickBooks for discrepancies. And this safeguard doesn’t rely on any special technology; it’s just a matter of having a firm process and sticking to it.

You can be the person forming great ideas that make money, but you don’t have to be the person to manage it. At the very least, ensure there’s someone — or some system — in place that can accurately keep track of it all.

Find this article helpful?

This is just a small sample! Register to unlock our in-depth courses, hundreds of video courses, and a library of playbooks and articles to grow your startup fast. Let us Let us show you!

Submission confirms agreement to our Terms of Service and Privacy Policy.

Already a member? Login

Joshua Agonya

Great advice. Sharing this with my entrepreneur network.

Reply9 months ago

Hadid Permana

Thanks for this idea

Jason Henry

Thanks, good advice

John Gerena

I read the article and its good solid advice. Reviewing your companies finances with someone else in your group, double checking makes senses. Thank You Great Article.

Eugene Pulver

Run safe with a limit on card spend.

Jesse Victor

Good

Register to join the discussion.

Already a member? Login

Create Free Account