published in e-magazine "Chatterpillar" Nov issue:
Seven
Golden Rules for Financial Discipline in
a Startup!
CA Swatee Shere Rane
You have setup a
Business Entity and are struggling with the initial startup challenges. As you
sweat it out in the day, you long at the end of it, to see a fat balance in your bank account and
the feel of hard cash on your work table. Yes, the task seems very daunting, but how does one get closer to this entrepreneurial dream.
Hey
there! You need to hold your breath and practice the winning mantra of “financial discipline”!
Here are seven Golden Rules of financial discipline which
shall lead your business to success and
growth.
Rule One: Prepare a Business Plan:.
When you are in
the planning stage, estimate only your realizable sales figures, and income and
be modest when you do this. Do not forget
to budget for all your operation costs, human resources expenses,
administration overheads, depreciation charge and finance and selling costs
appropriately. As Benjamin Franklin said, “Beware of little expenses, because a
small leak can sink a great ship”. Never over estimate your Income and under estimate your expenses and keep a close check
on the budget variances.
Rule Two: Test Fast, Fail Fast,
Adjust Fast (Tom Peters).
Yes, as an entrepreneur you have an idea and you need to
test whether this idea is commercially viable or not. When you are testing your
business idea, there are equal chances that you may win or you may lose. Hence,
you must test fast and check the results. If you fail fast, you need to adjust
fast. Never remain invested in a loss making business venture. Either you
correct your flaws quickly or exit quickly.
Rule Three: Don’t overburden
yourself with Debt:
These days, it is easy to obtain loans for various
businesses against securities and bank guarantees. But as a prudent businessman,
you need to calculate the debt costs correctly. If you don’t, you will be
surprised to know, after a few years have rolled by, that all your hard work
has paid rich dividends to your lenders, and not to you.
Rule Four: Update your accounting
records regularly.
Always remember that you are different from your
business. Hence do not load your personal expenses onto your business account. Also
ensure that your accounting records are updated regularly. Keeping your
accounting records up-to date, helps to manage cash flow, fund flow, efficiently and
it also helps in complying with various direct and indirect tax compliances.
Rule Five : Review your
internal control procedures, systems and financial statements to assess your
productivity, profitability and net worth.
Setting up healthy
internal control systems and procedures is very important for young start ups.
But equally important is continuously reviewing that the systems are working
effectively. While you focus on penetrating new markets, keep a vigil on your financials. Be vigilant about the productive use of your
business resources, ups and downs of your business profits and rise or fall in the net worth of your
business.
Rule Six : Save
Don’t forget, “A
penny saved is a penny earned”! So, all your efforts should be put in reducing
costs, making optimum use of funds and resources, and saving the surplus. Open
a separate bank account, wherein you can keep transferring a part of your
monthly surplus from your business account as your savings. Practice this
discipline for business survival and growth. This way, you will always have a
separate bank account to withdraw from, in case of business exigencies.
Rule Seven: : Invest your profits in
business
The final golden rule of financial discipline would be to invest a part of your business profits in your
business. You may add machinery, office equipments, computers, upgrade office
premises, compensate skilled human resources adequately, increase allocations
for marketing and publicity, etc. etc. There are umpteen opportunities to be
explored! And investing more money for these requirements, shall add value to
your business and guarantee your Startup - survival, growth and more and more
profits….
No comments:
Post a Comment