September 3, 2019
5 min read
Funds management is also called wealth and asset management of a startup and includes managing its overall financial health.
A startup’s finance is its one of the most important and sensitive aspects - its operations can be smoothly performed and new ideas can be implemented when it has the money to do both the things. Every startup requires fund and there are several sources from where the startup generates these funds. A startup goes through numerous rounds of funding if it’s lucky, and the funds it raises become the primary source of its budget that it can spend on expansion, recruitment, product development and other day-to-day operations of the business. This makes managing the startup’s funds carefully, highly critical so that the business never runs out of cash or finds itself in a financial crunch. This article sheds light on funds management for startups, its meaning and importance for a startup’s growth.
Funds Management means supervising and dealing with a startup’s cash flow and budget. Funds management is also called asset management and includes managing the sources from which the cash is flowing into the business and channels through which the cash is flowing out of it. The fund managers also have the responsibility to strike a balance between the liabilities and assets of the business to ensure that the startup’s credit score remains within the green area and there are no red flags in the financial report of the business.
Funds management is applied to all kinds of assets of a business, be it Intellectual property, immovable property held in the business’s name like land, real estate, machinery, etc. and movable property like furniture and fixtures, cash, etc. Funds management is thus, known as the methodical way of maintaining, operating, upgrading, disposing, and evaluating the funds of a business in the most efficient manner that supports a business’s growth.
Funds management for a startup requires closer attention to the cost and risk associated with each business activity as a startup in its early stages already faces a financial crunch. A startup can consult a good wealth and asset management consultant to know the right approach to manage its funds efficiently when it is unable to hire an in-house funds manager during its early stages.
When it comes to startups, funds management also includes studying the needs of the business and its financial goals and laying down a complete investment and budget strategy to achieve those goals. Funds management requires drawing up the complete portfolio of the startup to pinpoint its financial strengths and weaknesses. This way, a startup knows which channels are drawing up most of its funds and how it can restrict the outflow of cash from these channels.
Funds management also includes preparing the financial statements of the startup, which include:
Cash Flow Statement
Statement of Profits and Losses
This requires proper maintenance of the financial accounts of the business so that the business is never caught off guard by financial trouble.
Startup valuation is another important aspect related to fundraising and funds management plays an important role in enhancing a startup’s valuation. When the business is able to understand its financial weaknesses, it can work on improving these areas to strengthen its position before the valuation is done.
Allocating funds correctly can make or break it for the startup. How the money of a business is spent by each department must be determined in advance and each department must have its own individual budget for short as well as long term goals.
Wealth and Asset management enables a startup to allocate individual department budgets cleverly and avoid overspending or underspending on its focus areas. When the entrepreneurs are unable to manage the startup’s budget, it is advised to consult experienced asset management consultants to know the best strategy for the same.
Bootstrapped startups or self-funded startups may need to raise funds from banks or lending institutions before they opt for funding. Wealth management helps a startup to know which loans suits its requirements the best and manage its loan repayment efficiently.
Without proper funds management, a startup may lose control over its debts and run into problems that lead to the business shutting shop.
Scaling up too soon can be disastrous for the startup. Premature scaling of a startup is the direct outcome of not knowing how much the startup can afford. Wealth and asset management for a startup can prevent it from committing the same mistakes thousands of businesses end up committing each year.
Funds management allows the entrepreneur to know how much cash flows in and out of the business and how much scaling up would add to this flow.
Sometimes, an entrepreneur cannot be a jack of all trades and needs professional help for its wealth and asset management. For this, it requires guidance from a financial expert who holds domain expertise in wealth management for startups. This is why SeekWiser has built a state-of-the-art platform for startups to consult top wealth and asset consultants online in India.
With SeekWiser, startups can consult the best funds management experts easily online in seconds and understand the right approach needed for efficient funds management of a startup.
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