Posted by Shivali Anand
January 3, 2022 | 3-minute read (599 words)
Entering the world of entrepreneurship comes with a slew of hurdles. Every founder will confront any number of unforeseen issues as they launch their new business. Here, we examine three of the most common questions new entrepreneurs grapple with, along with advice from experienced founders to smooth your path.
What advice would you give to a startup that’s too busy to keep track of its finances?
Financial reporting is a legal necessity, so even the tiniest new enterprises typically don't have the option of ignoring it. One key benefit is that tracking your finances gives you a big-picture perspective of your company's finances, in addition to ensuring you create the reports you need for tax and legal compliance.
With a clear visual representation of sales, earnings, costs, cash flow, capital, debts and other benchmarks, you can create forecasts, such as determining when you'll be profitable, your financial runway and your valuation, among other things. Meanwhile, anyone contemplating investing in your company or lending you money will expect accurate financial records.
Many entrepreneurs think they don't have time to devote to financial reporting. If this is the case, consider investing in software that automates the process, or outsource financial reporting to another company.
What's employers' liability insurance, and how do you know if it’s required?
Since employer’s liability insurance is not generally mandated in the U.S., unlike workers' compensation which is required in most jurisdictions, this is one type of insurance you may not currently have in your toolset. But employers' liability insurance can save small businesses money by protecting them against financial damages.
Let's say an employee is hurt on the job. Your company's workers' compensation coverage will pay that employee's medical costs and some missed income. But the employee may assume that because they were hurt on the job, your firm is responsible for more than simply lost pay and medical expenditures, and they may sue you. Employer liability insurance helps in this situation by covering your legal costs, allowing you to keep operating even if you are sued.
Employers’ liability insurance is often referred to as "part two" of workers' compensation insurance, because it provides a more comprehensive benefit than an essential workers' comp policy. If you believe you may require this sort of coverage, speak with your company's insurance agent, a direct insurance broker or a consulting organization that can help select the optimal coverage. In some areas, getting employers' liability insurance requires consulting the state-run entity administering business insurance in that region.
What is an outsourced CFO service?
If you were to hire an in-house chief financial officer, that person would be in charge of your company's entire finance department. The role entails continually analyzing the business’s data to see what its financial future holds, strategizing where it should focus to make the biggest financial impact and assessing the state of its cash runway. An outsourced CFO accomplishes the same thing, but without working for your firm as a full-time, in-house employee. Instead, you keep the outsourced CFO on retainer, allowing you to call on their knowledge as required and communicate with them as often as necessary.
When your company isn't large enough to hire a full-time CFO or doesn't need one, outsourcing is usually the best option. An outsourced CFO will manage vital financial reporting and strategy planning for your business without the expense of filling the role on your staff roster. In effect, the outsourced CFO can help your company develop and boost efficiency while saving you the money you'd have to spend to hire a full-time CFO.