Financial Management

#Three Reason Why Startups Should Focus On Financial Management

Long-term financial sustainability can be achieved only by managing cash flows
#Three Reason Why Startups Should Focus On Financial Management
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Entrepreneur Staff
Senior Correspondent, Entrepreneur India
3 min read

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Generally, you discuss your start-up plan, when you have an execution plan, a marketing strategy or technology strategy.  Similarly, when it comes to hiring people for your venture, you would want toughest people on board and go to hire a Chief Executive Officer, Chief Operating Officer, Chief Technology Officer, Chief Marketing Officer.

But, when it comes to maintaining the company’s finances, one only plans to get a Chief Financial Officer on board, either when you plan to raise money from venture capital or if there is any discussion related to merger or acquisition.

There are tons of case studies where successful enterprises have been brought down especially due to poor financial management. A lot of MSMEs and startups, yet, fail to understand the importance of a good financial management strategy.

We at Entrepreneur India connected with industry experts to help you understand the importance of financial management.

#Health of your business

For Nikhil Rungata, MD and Country Manager, Intuit India financial strategy is one the most important part which suggests what the health of your business is.

When a company has its financial strategy in place and by any chance is going through a crisis, Entrepreneurs will have access to its finances which offers them a lot more control. “I think this will help businesses to survive much longer with complete control. So, I personally believe, it is one of the most important things and should be in place sooner or later, in whichever form, as it is crucial for the company’s growth trajectory,” he adds.

#Fund Management

Startups and funding have become synonymous off late in India. The linkage is not as sacrosanct as it seems, shares Rohitash Gupta, CFO, eClerx. Most successful startups that have lasted over a decade have typically funded themselves through internal cash flows.

“Even if the startup requires upfront investment for product development then the plan should be to do just one round of funding. And hope that next round of funding will give it more lifeline to either try more of same. If Entrepreneurs try new things, they may end up draining investor's money and more importantly their energy,” he said.

#Optimal Use of Resources

Startups have limited resources and should ensure the optimal use of those. Long-term financial sustainability can be achieved only by managing cash flows through sound financial strategies and cost control measures, says GST Star’s co-founder Shailesh Agrawal

Startups should decide on investment and expenses by understanding their risk appetite along with factors like seed funding and their business model. “To avoid misuse and ruin funds, a budget should be allocated for each and every department and make them accountable and transparent in managing their finances,” he shared.  

 

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The Basics of Financial Planning