Tips for Safeguarding Your Startup Business

A business’ first year can be a challenging period for owners. Staying cash-positive requires assiduous attention to expense management, and growing a business takes ongoing investments geared towards development. Smart organizational practices and financial planning can help you keep your startup on a path to profitability.

Create a Risk Management Plan

A comprehensive risk management strategy should address the greatest areas of risk exposure that could pose a threat to your operations. In addition to protecting your business against potential financial losses, you’ve also got to be conscientious about liability risks. You need to shield the business against common liability scenarios involving property damage, personal injury, and business torts.

Having adequate insurance coverage is vital to protect your new company against risk. Without the right coverages, recovering from a major loss or weathering a serious liability claim could prove to be impossible. Beyond the basic protection of basic general liability policy, it may be advisable to consider multiple endorsements such as directors and officers liability or professional liability. Every business’ needs are different depending on their activities, industry, and assets.

Practice Good Recordkeeping

Keeping your financial information well-organized enables you to maintain a clear financial picture of how well your company is performing. Monitoring your income and expenses with keen attention to detail equips you to make informed decisions about what you can and can’t afford to buy. It also shows prospective lenders that you’ve got a firm command of your finances and you have the managerial know-how to use loan proceeds effectively.

First, you’ll need a great accounting program that you feel comfortable using. The layout of the program that you choose should make inputting information feel intuitive to you. Nevertheless, you may need to be prepared to set aside some time for learning how to operate all of a program’s functions and features. Accounting software companies typically offer self-guided tutorials or interactive webinars to familiarize their customers with their product.

Next, you must establish policies about how you will maintain supporting documentation on its financial activity. Your contract management procedures and email retention policy for staff should be consistent with applicable industry standards as well as the Internal Revenue Service’s regulations regarding recordkeeping.

Work on Building Credit

For startup owners, simply getting from one month to the next may seem like conquering a mountain. During that harrowing journey, you probably aren’t nearly concerned with the effect of your financial management activities on your business’ credit score as you are with the immediacy of meeting your ongoing obligations. It’s imperative that you don’t lose sight of the importance of building your business’ credit. You’ll want a great score working in your favor in order to have access to the resources that you’ll need to achieve growth. If your score is too low, lenders may perceive the possibility of lending to your company to be wholly untenable. Also, you may have to pay higher interest rates on key overhead costs such as credit cards or equipment financing.

To start your business off on the right track with credit, you have to be mindful of your personal credit. A principal’s consumer credit score could weigh heavily on how financial institutions assess a startup’s creditworthiness. In addition, you have to avoid making late payments on the active tradelines on your business’ credit report and also make an effort to keep your overall credit utilization ratio healthy.

Keep watch over your score with a credit monitoring app that can send you alerts about score changes. Over time, you’ll see how your expense management activities are affecting your score positively or negatively. Analyzing your credit in this manner is going to offer you some insight into what things are working well for you creditwise and what types of activities may be dragging your score down.

Ultimately, it’s reasonable to expect some setbacks over the first year that you’re in business. The steps that you take to foresee and prepare for setbacks can help you come out on top.