Canadian businesses require a steady cash flow to maintain smooth operations and ensure they are generating a profit. Entrepreneurs have to engage in proper financial management to ensure their company stays financially healthy. Startups don’t often have a large customer base to consistently generate profit that can offset financial mistakes.
Startups often invest a lot of their profit into their growth to expand their customer base, and if their finances are mismanaged, it will affect their overall growth. If your startup is struggling, consider adopting the following financial management 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. The accountants can also make financial projections and provide recommendations that will help 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 suggestions for firms and professionals to help manage your finances.
2. Stick to the planned budget
At the start of every fiscal year, startups should prepare a budget that will guide their spending. It is crucial that entrepreneurs stick to the planned budget, as deviations might disrupt their financial projections and stop 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 have to be paid back when due, or the interest on them will compound, making them more expensive to pay off. It will also reduce the business’s credit rating and make it more expensive to borrow money in the future. If a startup frequently defaults on its loans, some banks and financial institutions will refuse to lend money, reducing their options in their 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 causes confusion and can take extra unnecessary effort to sort out. This can result in incorrect tax payments and financial projections, which will harm their business.
5. Pay taxes promptly
Business profits are subject to tax, and entrepreneurs have to calculate how much they owe so they can pay what is due to the Canadian government. It is vital that these taxes are 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 give them more money to reinvest in their growth.
Endnote
Financial management is essential to the survival and success of startups, especially with limited cash on hand. 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.
Photo by Micheile Henderson on Unsplash
