Building a Financially Resilient Startup Through Smart Accounting

Are you also into the accounting profession? If not, let me tell you how interesting things can get!

With the experience I have had in the accounting industry, the game has evolved greatly. In current dynamics, accounting is more than just recording numbers. The advanced tools and software in the domain are now providing deep insights into business operations and how the finances are performing. 

Well, these features are also necessary in today’s highly competitive world. It is also called the new generation of accounting systems (Miran Pikovnik on LinkedIn). 

Since the tech is so helpful and mainstream in the current scenario, it’s worth having a discussion. Keep reading till the end as I introduce smart accounting to you in the simplest form possible.

Why Accounting is the Backbone of Financial Resilience

Accounting is the way through which the company’s finances are recorded and judged. From the incoming cash flow to all payable liabilities, everything is recorded in the books. 

This way, the professionals intend to find an accurate image of what’s happening with the company’s funds and steer them carefully. The experts forecast the future, help in informed decision-making, and takes a proper sight on incoming and outgoing flows.

DID YOU KNOW?
Speaking of business owners who are satisfied with the services provided by their company’s accountants, the number of such owners is limited to only 61%.

The Role of Credit in a Startup’s Financial Strategy

Nowadays, businesses are flooded with alternatives through which they can get credit. Credit providers like Flexline are always on their front foot to assist enterprises with funds. But is getting a credit to fuel your company’s finances really worth it?

Of course, there are some disadvantages to seeking funds from credit, but it totally depends upon the situation. The following are some ways through which businesses can benefit from credit:

• Access to Capital: It’s not always the case that the business owners always have the monetary backing to support the enterprise, or the investors are ready to invest their money into your business. In such situations, banks and financial institutions provide various credit options like loans and lines of credit that can be of help.
  
• Prevent Ownership: If an investor buys a share of the company, they become the owner of that company’s share. In the case of credit, the owner of the company retains its share along with securing the funds they need.
  
• Building Creditworthiness: If a business seeks and pays back the credit responsibly, considering all the factors such as deadlines, interest rates, etc., it helps in building the business’s creditworthiness among banks. This way, seeking loans and lines of credit in the future becomes easier. 

These are some ways credit can actually be a plus point for businesses instead of being a liability. 

How to Build a Resilient Budget?

According to Harvard Business School, there are four steps that you cannot ignore to build a budget for your organization:

1. Understanding Organizational Goals

Figure out what the organization needs to achieve in the near future. Dedicate goals like cutting down on cash flow, reducing debts, etc., all need to be noted down. With those goals, finding the right path to cover and making informed decisions is the next role experts need to focus on.

2. Income Estimation

Now, figure out the income streams of your business. You have to make expenditures to make your business operations sustainable over some time. But, these expenses should be reasonable for the income your business is making. Hence, estimating the inward cash flow becomes necessary.

3. Identify Your Expenses

Now that you have estimated the amounts and the channels from which your organization is going to receive funds, it’s time you make a plan on how your organization is going to spend those funds systematically. 

4. Determine Budget Surplus or Deficit

Lastly, you figure out whether the organization is going to have a budget in surplus or deficit in the end. This budget surplus or deficit is going to impact significantly on your next term’s finances.

Monitoring Financial Performance

Keeping an eye on your day-to-day finances is equally important as planning them. For instance, your firm should regularly keep a close eye on the spending and incoming funds.

This way, not only your firm will be able to optimize the flow, but also stay flexible to the challenges that might occur in the near future.

DID YOU KNOW?
To measure profits, there are some metrics you can follow such as: 

• Gross Profit Margin
• Net Profit Margin
• Earnings Per Share
• Return on Equity

Conclusion

Lastly, smart accounting is more than just regular bookkeeping. Instead, smart accounting intends to focus more on fund allocation, monitoring accounts, and making viable decisions that will lead to your firm’s financial success.

It also holds a dedicated importance in cases when your business finally needs to remain financially resilient. Apart from that, if you find my writing helpful in any way, share my work with your team and colleagues as well.

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