Canadian businesses require a steady cash flow to maintain smooth operations and ensure they are generating a profit. Entrepreneurs must engage in proper financial management to ensure their company remains financially healthy. Startups often lack a large customer base to generate profits that can offset financial mistakes consistently.
Startups often invest a significant portion of their profits in growth to expand their customer base, and if their finances are mismanaged, it can negatively impact their overall growth. If your startup is struggling, adopt the following tips to keep your finances in order:
1. Hire a chartered accountant
Chartered accountants are trained to monitor
cash flow, and they can help startups manage their finances, maintain a budget, and stay financially viable. Accountants can also create financial projections and provide recommendations to guide business decisions.
To find a reliable accounting firm or chartered
accountant Mississauga, Toronto, or other Canadian cities, entrepreneurs can search “chartered accountant near me” on Google. This can provide valuable suggestions for firms and professionals to help manage their finances effectively.
2. Stick to the planned budget
At the start of every fiscal year, startups should prepare a budget that will guide their spending. Entrepreneurs must adhere
to the planned budget, as deviations may disrupt their financial projections and prevent their business from meeting its goals.
3. Repay business loans when due
Startups often have to take out loans to fund their operations, and these loans must be repaid on time, or the interest will compound, making them more expensive to pay off. It will also negatively impact the business’s credit rating and increase the cost of borrowing money in the future. If a startup frequently defaults on its loans, some banks and financial institutions may refuse to lend money, thereby reducing its options in times of need.
4. Avoid mixing personal and company funds
Entrepreneurs should avoid mixing their personal and company funds. This usually happens when business owners use their company credit cards to pay for personal expenses and vice versa. This can confuse and require unnecessary effort to resolve. This can result in incorrect tax payments, financial management, and projections, ultimately harming their business.
5. Pay taxes promptly
Business profits are subject to
tax, and entrepreneurs must calculate their tax liability to ensure they pay the amount due to the Canadian government. These taxes must be paid promptly to avoid fines and other sanctions.
6. Minimize overhead costs
Startups should minimize their overhead costs by embracing automation and remote work, using cost-effective tools, and creating streamlined workflows. This will increase their profit margin and provide them with more funds to reinvest in their growth.
Endnote
Financial management is crucial to the survival and success of startups, especially when they have limited cash reserves. It is recommended that startups employ a chartered accountant or partner with an accounting firm that can manage their finances diligently to avoid financial mistakes that can disrupt their operations.
