Financial Planning for Startups: Tools and Tips for Success

While the startup buzz is catching up fast with newbie entrepreneurs, there are many challenges too. Though India has a strong startup ecosystem, many Indian startups have failed to sustain due to improper financial planning and management. The failure, in most cases, is not because the idea was not great, but because it was not executed well. 

This blog talks specifically about the tools and tips for successful financial planning by startups, including leveraging government schemes for MSMEs, making the best use of business loans, and working capital loans.

Tools & tips for a successful start-up financial plan

Building a solid financial plan is the cornerstone of every successful start-up. With the appropriate tools and handy tips, you’ll be able to manage cash flows and project expenses effectively and start making intelligent business decisions from day one.

Start with a budget

For a startup or an established business, budgeting is the first step. This gives you an insight into the income and expenses of your business. Create a list of income sources and expense heads. This gives you a clear idea of the way forward and how to balance earnings and expenses.

Create a financial plan

A financial or business plan is the next important resource for financial planning. It is like a roadmap and a must to attract investors or a working capital loan. Typically, the business plan should cover heads and sub-heads like initial capital requirements, projected income and expenses, break-even analysis, cash flow forecasts, how to fund, and so on.

Keep a close eye on cash flow

For any business, cash flow is the lifeblood. Remember, poor cash management can become an obstacle for even the most promising startups. You can do this by preparing cash flow statements month-to-month, negotiating payment terms, avoiding unnecessary expenses, and using accounting software like TallyPrime.

Personal and business finances should be separate

Open a separate business banking account if you have long-term growth plans for this business. At all costs, your personal and business accounts and finances should be separate. Mixing the two can complicate matters, especially during tax filing. It will also adversely impact the financial health of the company.

Leverage government schemes for MSMEs

The Indian government supports different MSME schemes designed to promote entrepreneurship. Some of these include –

• Credit  Guarantee Fund Trust for Micro and Small Enterprises, where credit is offered without any collateral.
• Pradhan Mantri MUDRA Yojana loan, where businesses can take up to 10 lakh as a loan, depending on their category.
• The Startup India Seed Fund Scheme helps new entrepreneurs with prototype development, product trials, proof of concept, etc.

Fund your startup

Consider different sources of business loans for MSMEs. Some of the common options include – bootstrapping, where you use your money to start the business, seek funding from venture capitalists or angel investors, take business loans for MSMEs that are designed for micro and small businesses, or take loans from banks and Non-Banking Financial Corporations.

Maintain financial discipline

Startup success depends a lot on making a realistic business plan and financial projections. Hire experienced accountants and legal experts to make sure that the finances of the business are smartly managed, be it tracking cash flows, planning strategic growth, or making wise financial decisions.

Tax and compliance planning

Don’t underestimate the complexity of tax planning and compliance. Your business will need to register for GST if the turnover exceeds the threshold. In the case of interstate supply, too, GST registration is a must. Have a clear understanding of tax deductions and benefits for startups. You will also be required to file returns on time, including TDS, GST, and income tax.

The right financial tools matter

Your startup will need a few tools to help you with financial management. This includes –

• Accounting and bookkeeping tools for GST filings, automating ledgers and invoices
• Payroll Management tools for timely payments to employees and ensuring PF/ESI compliance
• Billing and Invoicing tools for automated invoices and bill generation.
• Cashflow analysis tools to keep an eye on what cash is coming in and what is going out.
• Expense tracking tools to automate expense entry, review, and approval processes.
• Budgeting tools for real-time tracking of expenses vis-a-vis budgets.
• Loan management tools to monitor loan EMIs, repayment schedules, etc.

Monitor and adjust regularly

Reviewing the settings from time to time is important. You cannot set it for once and then forget all about it. As the business evolves, scenarios change. Costs change, cash flows change, and so do revenues. You need to monitor the financial goals once every quarter. Your comparison of actual vs projected should be monitored too. Gain enough agility so that adapting to new scenarios is easy and fast.

Conclusion

Whether it involves budget creation, managing expenses, or staying GST-compliant, you need the right tools that empower proactive planning and decision-making for your business. TallyCapital is a comprehensive solution that helps you manage your finances with clarity and confidence. It also provides financial insights, digital tools, and expert guidance, all in one place.