Key Finance Considerations When Starting A Business

Starting a business is an exciting, busy, and scary time for most new business owners. There is so much to think about, how will I attract customers, what is my strategy, what is my marketing plan, what bank account do I set up, do I need insurances, and how long will it be before I get paid and make money? Ensuring you have a plan for how you will fund these, will help you decide to what extent you can market and promote your business, how you will pay suppliers, how you will pay for insurances and/or necessary requirements you may need and how you will pay bills for the next 12 months.

We’ve put together some key finance considerations you need to be aware of when starting a business, to minimise risk and stress during the first 12 months.

Set up your business in the correct structure

This might not seem important when you first step up the business or think about how much you will or won’t make, but it is best to structure a business with the end goal in mind. This will help protect you, especially when business partners are involved and could hopefully help you with tax strategies now and in the future. Spending time with your Accountant to get this right initially, is very important.

Your cashflow and budget

This is extremely important when starting a business and throughout the entire time you are in business. Be aware of your key expenses, supplier terms and include quarterly and annual expenses too. Doing this over a 12-month period and reviewing every week or month, depending on your business, will help you keep on top of your financial position. Think realistically about when you will start to receive payments. Being realistic and conservative will help lessen any unexpected surprises. Don’t forget to include any wages you may need or be able to take. We all have personal expenses too.

Look at how long your initial funds will last? Consider what you need to make and by when? Although this isn’t always realistic initially, it’s good to have a goal in mind and know what you are aiming for. How long will it take to be profitable? Get your Accountant to sit down with you and make sure you’ve accounted for everything – including Tax and GST if applicable.

Incorporate this cashflow into your business plan.

Think about how you will plug any shortfall in funds

Once you’ve put together your cashflow and you know your budget, look at what will happen if/when your initial cash injection runs out. If you anticipate your initial injection will be sufficient, consider whether it is sufficient by a large or small amount. It you have a shortfall or funds are very tight, think about how you may fund any shortfalls.

Do you have more funds to put into the business? Are you prepared to put additional funds into the business? Do you require business lending ie; credit card, business loan, overdraft etc? It is best to think about this and, if required, engage a specialist early. If a cashflow issue can be predicted early, there are generally more options available.

When dealing with suppliers, know your terms

If you deal with suppliers in your business, make sure you know the terms. Generally, suppliers aren’t at their most flexible for new businesses, but you need to make sure these terms work for your business and are achievable. Keeping on good terms with your suppliers is important. The more they work with you and get to know your business, the more you can work together to potentially make terms more beneficial for your businesses, and cashflow!

Get the right advice from the experts

When it comes to finance, making sure you get the right advise is critical. Engage an Accountant that understands your business and you trust, as they are good support for business owners. Financial Planners, Business Advisors and Finance Brokers can all be beneficial to your business, depending on your needs and business stage. Ensure they know your finance goals, both business and personal, and help you put strategies in place to achieve these. Getting them to work together is also great for you, as they will all work towards your goals.

Don’t forget your personal finances

Generally, when we start, it is just us and our business partners if we have them, there is normally no staff. In this instance, we must decide whether we pay ourselves first… or last. For our business, we generally like to ensure we have 3 months of expenses in our bank account. This is down to individual preference and knowing and monitoring your cashflow. If there are funds left after this, we will get paid. If there’s none – we don’t. So, we need to be sure we know our personal cashflow too. Be realistic, if you cannot afford to take from the business, will you still pay yourself a wage? If you don’t get paid for 6 months – how will you survive?

A study by ASIC revealed 51% of start-ups fail within the first 4 years. 41% of those business owners say inadequate cashflow or high cash use is a driving factor.

None of us want to be a statistic and more importantly, we don’t want to give up on a dream we are so passionate about, because our bank balance says we have too! Speak to the experts and plan, plan, plan!! Talk to us today if you would like some guidance.



Credit Representative 490860 is authorised under Australian Credit Licence 389328

This article provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.

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