So your company’s in its very early stages. We’re talking a skeleton crew of staff, minimal sales and even less cash. While your focus is understandably on immediate survival and how you can hit your first big hurdles, what else should you be thinking of, especially where your finances are concerned?

1. Establish a simple accounting system. You don’t need many “bells and whistles” at this stage in the game, but you do want to set up a system that is easy to use and that is built to grow with you. Most of our clients use QuickBooks, but there are other options to choose from. But it’s much easier to establish your system from the get-go, rather than to try to roll over your accounting into a system at later date when your finances become more complex.
2. Set up an accounts payable system. In the early stages it’s especially important to establish a foundation for maximizing your cash flow. Consider all of your expenses, then think through how you will record and cover them. There are many tracking systems to choose from. Work with a professional to assess your needs and identify your best system. Once you’ve selected your system, enter all expenses and establish your invoice AP schedule so that you’re always paying your bills on time.
3. Establish your payment collection process. You can improve cash collections by establishing an AR process that enables you to list out all open invoices and balances. Ideally you’ll want to establish your credit guidelines, policies and collection timeline before you start collecting your first payments. Keep on top of accounts receivable; consider including an incentive for customers who make early payments as part of your purchase terms, and have a plan in place for managing late customer payments.
4. Develop your financial projections. Create a bottom-up financial forecast that uses your detailed budget and sales projections as the starting point. This needs to include estimates for spending by department – IT, HR, office rental, marketing, legal and other professional services. Don’t forecast beyond three years though, because projections really aren’t meaningful past that point. And plan to update your forecasts on a monthly basis and anytime there’s a significant change in your business plan, market, or milestones.
5. Build your budget. Calculate your expenses and subtract them from any revenue you are earning. Identify the resources you’ll need (and associated costs) to hit each of your milestones. Once you’ve worked these out, you’ll be in a position to balance them against your available funds. The process will be iterative, and you should expect to rebalance priorities as you hit each milestone. Managing working capital, mainly cash at this stage, is critical since liquidity is a huge concern. Look into vendor financing and be strategic with your marketing and sales strategy – target selling opportunities that deliver high returns while being cost effective.
6. Forge banking relationships. Comparison shop when it comes to fees and consider other aspects like the ability to get in-person assistance when necessary versus online-only customer service and support options. Also take care to choose an institution that has experience working with early-stage startups: not just in taking their deposits, but also in providing creative and flexible lending solutions. And whatever you do … be sure to keep your business and personal accounts separate!
7. Don’t overspend on building your team. Hire only for those positions you actually need and rely on contract staff, part-time employees and freelancers for as much as you can. Creativity and flexibility are essential qualities to look for. Protect yourself by clearly outlining confidentiality, termination provisions and IP ownership in employee contracts and hiring documentation. Since you probably can’t offer much cash, consider the full range of non-cash perks as sweeteners. Equity is likely to be a key piece of the puzzle, but don’t forget to structure in incentives based on hitting key milestones, and deferred compensation arrangements.
8. Select a payroll solution. If you do hire employees, you’ll need to select a payroll provider. The right HR solution will depend on how many employees you have and what kind of package you’re offering. Just make sure that whatever solution you choose covers payroll taxes and workers’ comp.
9. Know your tax obligations. When you’re pre-revenue, taxes may not be high on your list of concerns — but they should be. Hiring a tax professional with early-stage startup experience is the best way to make sure you’re staying on top of all of your federal, state and local obligations, from payroll taxes, sales taxes and 1099s to filing your quarterly taxes.
10. Decide whether you need to pursue outside funding. The answer isn’t always “yes.” I always advocate bootstrapping for as long as possible to avoid dilution. Funding is a good option if you’re looking to accelerate your growth — it’s not for market/product validation. If you do decide to pursue funding, know your options and create a funding game plan. There are more and more ways to land funding — even for embryonic startups — and all roads do not lead to VC. Often, in the early stages, friend and family are your best first option. Also consider angels, super-angels or even crowdfunding, an increasingly interesting option for raising capital.