Financial discipline, which alludes to spending and saving in accordance to the goals and plans intended to realise certain monetary goals, is very crucial for a startup’s growth.
The notion of discipline or controlled behaviour is not applicable only in the context of general social behaviour. The concept can prove to be especially handy in the realm of money and finances too. In fact, today the concept of financial discipline, which alludes to spending and saving in accordance to the goals and plans intended to realise certain monetary goals, is generally accepted as vital to any sort of accomplishment.
It refers to the ability to say no when required, to save instead of spending, to undertake measures, even if you are not too keen, for financial stability.
While the term is applicable in all spheres of life, it becomes doubly important when start-ups are concerned. More often than not, startup pilot teams consist of product designers, marketers, and engineers i.e. folks who recognize and comprehend buyers’ needs and then develop and deliver appropriate right products and/or services.
Financial Discipline Is Important
It may be easy to assume that the existence of dedicated teams would directly and easily translate into success for startups. But in their constant endeavours to rapidly make headway in the market and expand into a sizeable company several startups often wind up becoming oblivious to well-grounded financial discipline – an all-important facet of success.
Startups can frequently be entirely and excessively focused on their product and/or service, thus assigning a comparatively inferior position to other considerations such as reporting, accounting, statutory compliance, back-office tasks, long-term plan of action, and finance tactics.
This inattention to finance and accounting can lead to grave consequences especially scaling up is under consideration. Regardless of their background, every investor would like to observe sterling financial discipline before they invest their money in a business.
And this is why startups must concentrate on financial discipline and on instituting dependable financial systems from the very beginning. It is important to ensure that a business prospers on the foundations of solidity and certitude rooted in financial discipline.
And ignoring its importance or failure to introduce a culture of financial discipline can pose a great risk to startups.
Simple Steps For Financial Discipline In A Startup
Here are a handful of finance-related policies that startups must adopt in order to succeed:
Comprehensive Documentation
Keep a track of every rupee spent. From the money spent on travelling to/for work to practically everything else with an associated cost. Though the primary and more obvious objective is to ease the process of calculating and paying taxes, the other intention is to record business-related expenses.
As the business grows, you’ll, at some point, need to peruse detailed records. And if you fail to record them as you go, the information is bound to be lost, usually for good. Furthermore, precise records allow start-ups to chart and plan their future and growth.
Chart Of Accounts
The chart of accounts is a list of all the accounts identified and used by a company for recording transactions in its financial statements. Defining these categories under which each transaction for the business is conducted helps instate the financial course for startups. It also gives the top brass a general summary of each transaction’s nature and purpose.
Set Up Internal Controls
Put an internal monitoring system into practice since it is not only of vital importance for attaining financial discipline but also helps make sure that mistakes and inaccuracies are identified and corrected at the earliest possible.
Admittedly, setting up a startup generally revolves around problem-solving, value creation, making mistakes, learning from said mistakes, and rectifying them. However, all of this costs money and in start-ups, money is generally limited.
Thus, it is imperative for them to practice prudence and financial discipline to ensure they are able to work towards achieving their goals even while facing financially extreme conditions.
About the Author: This article is contributed by Vikram Upadhyaya – Chief Evangelist at GHV Accelerator.
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