The Importance of Financial Knowledge For Startup Founders

Regardless of your startup projects, finance plays huge role in it. It can be considered as the lifeblood of any business. If you consider building a startup, you may need to take full ownership of the financial aspect and it might look so scary. It is even more daunting if you don’t have any background or knowledge in finance or accounting. When it comes to finance, mostly what comes in mind is huge numbers. An error to a comma can make huge financial mistakes.

 

Consider outsourcing financial side of your business?

Unlike marketing where many people consider it to be more about how to use intuition and common sense, finance and accounting are more frightening to enter because they seem to have huge barrier. It is understandable that some startup founders are tempted to outsource managerial accounting and finance. However, it is not necessarily a smart decision. And here are what you need to consider instead:

 

Financial decisions are too impactful to outsource

Financial decision could impact too big to be taken by the third party. Financial decisions are the jobs of startup founders after all. It is their job to decide where and how to use resources of the organization in order to achieve its goals. If you outsource your managerial accounting and finance, there might be dire consequences you will have to expect. It is likely to result in poor cash management, especially for small business that just started. Your startup revenues tend to be volatile and unpredictable. In fact, it is shown in the study that the most common major reasons of failed startup is running out of cash and failing to raise new capital.

 

Therefore, it is important that you have financial knowledge. With a good grasps of the fundamental financial knowledge, you will be able to make competent and prudent financial decisions. With it, you will also be able to budget and plan your runaway and raise capital by producing convincing financial projections to draw in more investors.

 

Is startup finance that difficult?

Difficult or not is subjective but in general, startup finance is not that difficult. Financial specialists may face a very steep learning curve while studying and mastering finance. However, it might not be the case for startup founders. It is great if you can have financial knowledge that is on the level similar to the specialists. However, it is not necessarily needed for startup founders. You don’t really need high-level financial knowledge to able to build your startup. What you need is a good grasp of arithmetic combined with financial and accounting concepts applicable for startup.

 

Learn relevant aspects

When you decide to learn more about finance and accounting as a startup founders, you need to learn materials that are relevant to startup world. For example, you need to know the difference between revenue and profits, direct and indirect costs, gross and net margins, etc. With fundamental financial knowledge, you will be more comfortable with making informed financial decisions for your startup projects.

 

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