Financial planning refers to how your company plans to make and spend money. It’s also figuring out how to track income and expenses. Actual operations will become much easier with a little bit of planning ahead. Familiarise yourself with the following terms and make a sound financial plan for your company. In case your idea can be tried in a real market, you have an opportunity to learn how to set up bookkeeping, do the accounting to calculate profit or loss. You can also create a webshop or other sales channel for real.
Most important terms
Pricing model is a simple way of explaining how your idea will make money (or where do you get it in case of social type of enterprise). There a plethora of opportunities from direct selling to subscription based pricing so this is one are where you need to find your sweet spot.
Where to get money to start (Raising money)
Before you can start selling you usually need to spend some money to make sellable product or service. This process is called funding or raising money. Depending the amount needed, you can pick your own pockets (between 10 and 100€ in NY Start Up -program) or ask others to invest (or loan) money. Before others (called investors) will loan you money you need to convince them that your company is a good investment. See more information about getting money to your company.
It’s usually a good idea to estimate how much you are going earn (income from sales) and spend (expenses). When you combine your estimates for sales and expenses, yoll get a document that’s called a budget. Without proper budget you’ll not be able to attract others to invest in your company.
Bookkeeping and Accounting
When you start selling and spending real money you have to record the activities and now we enter to the marvellous world of bookkeeping and accounting.
Bookkeeping refers to manual (or automatic) task of recording your sales (or other income) and expenses and keeping track on them. These are called financial transactions. When you have recorded all the transactions, you can calculate how much you have earned and spend and calculate profit or loss.