5 ACCOUNTING CHALLENGES STARTUPS Face & How To Fix Them
DIGITAL MEDIA MARKETING MB Enterprises
Accounting challenges are the most common ones that
assets are increasing, enabling it for debt settlements. Cash
comes up in new businesses and fixing them up can be a big
flows in a company’s financial statements are listed in three
financial issue. At the same time when starting a business
sections detailing activities. The three sections are cash flow
solid accounting practices are a necessity to have success
from operating activities, investing activities, and financing
initially.
activities.
Accounting and bookkeeping holds paramount importance in
Maintaining a positive cash flow can be a huge challenge for
the initial phases of a business. As a business is in the early
fresh companies and new startups. The new companies’
days, accounting analysis, ratio analysis and recording of all
usually avoid the cash flow problems by staying on top of
activities regards to the business is a must. This is all
their finances, maximizing their revenues and finally minimiz-
because of the investment in business that requires a ROI i.e.
ing the expenses. The best way is to minimize the expenses
a Return on Investment.
and risks associated to business initially. This can be strategically achieved by reducing the costs payments and lowering
WHAT IS A ROI?
the cost of inventory.
A ‘ROI’ or Return on Investment is the Return you are getting on the initial investments that you have incurred on the
2. KEEPING TRACK OF FINANCIAL INFORMATION:
business. As businesses demands huge Returns to get
While running a small business and a new startup one can
established, it is necessary to get hold of the ROI or Returns
easily miss keeping track of financial information. As an
on Investments in a fully functional way.
owner or a CEO of the enterprise keeping track of the
However, as we discuss the issues and challenges when
financial information is a risk assessment exercise. It always
starting a new business. Here are some of them;
allows to optimize the cash flow, pay the taxes on time, success evaluations of the business and its standings, and
1. Maintaining a Healthy Cash Flow
attracting new investors through profitability. All these
2. Keeping track of financial information
activities are important to be successful and reductions in
3. Bringing in enough capital
initial phase accounting challenges.
4. Handling Payroll 5. Paying The Taxes
3. BRINGING IN ENOUGH CAPITAL: Enough capital means enough investments and making
1. MAINTAINING A HEALTHY CASH FLOW:
yourself secure for future investment options. A new invest-
Maintaining a healthy cash flow and with consistency is a
ment obviously demands big initial capital investments,
litmus test of a new startup. Cash flow in accounting terminol-
however, at the same time there should be a proper risk
ogies means the Net Flow of cash at the end of the month.
analysis to make goals sustainable. Most businesses accom-
Hence, in more financial terms a Cash flow is an important
plish these tasks by getting hold of or acquiring the investors.
financial metrics that determines the liquidity of a company. A
You have to convince the investors that their investments are
positive cash flow is an indication that a company’s liquid
risk free and they will not be incurring losses.
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MBE BUSINESS MAGAZINE APRIL / MAY 2020
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