Business Finance Guide: Investment Planning, Fudning Sources & Accounting Setup
Business Finance: Investment Planning Funding and Accounting
What comes to mind when you hear the word ‘startup’? An engaged young man, likely in a university library, putting his heart and soul into an idea. Or maybe it a mom who has just got that brilliant thought that is going to change her life and lives of other tired moms so-so easier. In either case, they are inspired, filled to the brim with their visions of a better world.
Beautiful? Indeed. What’s missing, though?
When we set out for a business, we tend to focus on the idea, the imagery or the future. However, the scaffold of the business — the financial structure and cash flows — may be put of the far shelf.
Is business finance all that bad? EasyStaff Payroll is a contractor management platform, and we have things to say on business planning. Read on to find out about funding, expense tracking and cash flow management.
How much am I willing to invest initially
Beyond time, effort and energy, money is a major investment asset you need to be able to bring into your business. Be it a short ad campaign to test the market or a Linkedin-based outreach to attract some CustDev leads, you will need at least some financial space. To better evaluate your financial stability and the limit of dedication you are willing to go to, consider asking yourself these questions.
What is my personal risk tolerance
Risk tolerance is a popular term among investors. From a financial/investment standpoint, risk tolerance is the amount of money one is willing to lose in a given investment decision. For example, an individual with low risk tolerance has a low-risk investment portfolio, e.g. high-yield savings accounts, certificates of deposit or investment-grade corporate bonds. Risky new investment options, like crypto or venture capital, either make up the lesser part of the portfolio or are not present at all.
On the other hand, risk tolerance can be defined from a personality standpoint. You see, risk is, in many ways, the very opposite of comfort. And comfort, too, doesn’t mean the same thing to people at all. Risk tolerance as a personality trait, in simple words, is how OK a person is with having to risk something now for the sake of a long term reward.
The concept, whether applied psychologically or investment-wise, helps you assess how ready you are mentally and financially for an endeavor. Thankfully, there are many online tools, free and paid, to help you understand your risk tolerance.
- For starters, go to a short fun test by PsycTest Quiz. The questionnaire is selected from ‘Investment Studies’ and is a tested assessment tool.
- We also like the test by Fervent Learning. It is less academic, if you will, and we found its results interesting and accurate.
How much of my own capital can I commit
Once you’ve figured out how risky you are, you then need to calculate a concrete amount of money you are comfortable investing, that is your risk capacity. Risk capacity defines how much you can lose and recover from it in the short-term.
Naming that sum of money is difficult, so we recommend honestly answering to this questionnaire. We recommend actually writing down your responses so you have tangible results to build your future planning off of.
- If you suddenly lost some of your savings, how much could you lose before your usual bills or living expenses would be affected?
- If you faced a setback—like losing some money or having unexpected bills—would you need to dip into your savings right away, or could you wait for things to improve?
- Are you able to regularly set aside some money for the future, and could these savings help cover you if you lost money in the short term?
- Do you have extra resources or support (like a steady paycheck, family help, or side income) you could turn to if your main savings took a hit?
- How many months could you pay your basic expenses just using your emergency savings if needed?
- If you lost some of your savings, how long would it take you to rebuild those savings with your current income and spending habits?
- Do you have any big expenses coming up in the next year or two that you can’t avoid, even if your finances take a hit?
- How secure is your job or primary source of income—could changes there force you to spend your savings sooner than planned?
- Have you dealt with a tough financial situation—like job loss or big unexpected costs—in the past? How did you manage, and how long did it take to recover?
- If your finances took a turn for the worse, what would you do first: cut back on spending, look for extra income, or use up your savings?
Where can I get funding
You now know exactly where your risk capacity is at, and you are all set for the next step: actually pulling money into your project. There are many channels to direct some serious finances towards your startup.
Small business loans: do I qualify?
A small business loan is a different type of loan designed for small businesses that need to expand operations, buy equipment or cover unexpected financial risks. Small business loans are structured differently from traditional loans given out to individuals with seemingly more favorable down payments and interest rates.
Qualifying for a small business loan means meeting a series of criteria a banking institution considers reliable in evaluating your potential as a borrower. It is only natural that every bank has its own qualifications, yet there are several factors you can expect to be held against in any bank.
- Credit score. Essentially, it’s how trusted you are. Your business credit score is directly related to your personal credit history.
- Annual revenue. It is expected that you come in as a somewhat established enterprise with some money rolling into your accounts monthly and yearly. Meeting at least the minimum criteria is a must.
- Debt Service Coverage Ratio, or DSCR. It measures the currently available operating income to the overall debt of your business. Naturally, the higher the ratio is, the better.
- Years in business. Plain and simple: the longer you have been in business, the more trusted you are.
- Business industry and size. If you come from a business area that is generally considered risky, volatile or even non-grata, then banks are not likely to look kindly at your request.
- Business plan and loan proposal. The bank needs to analyse if you know your stuff. It is, after all, giving out money to earn off of it. If you can’t articulate the plan of your business, you may not seem a promising lender to earn with.
Qualifying for a small business loan takes work, and it should be continuously performed right from day 1 of your business.
What’s the problem with small business loans though? You must have already got it by now that small business loans are given out to established small businesses. Marching into a bank shouting ‘Eurika!’ and promising them a la-la-land is not an option. If you are looking for starter cash, fresh from your promising CustDev interview, small business loans may be the beginning of heavy debt rather than a much needed boost to catapult your business into a new market.
Crowdfunding and angel investors: is it worth it?
If you go to multiple people and receive $1 or $2, you go around crowdfunding your business. The beauty of the method is in how accessible it is. Unlike bank loans that put candidates to serious scrutiny, crowdfunding platforms present almost no entry requirements. Crowdfunding begins when you share a post on socials asking people to donate something to your startup.
If you want to be centralized, you may consider platforms like Kickstarter or Gofundme. These platforms, along with many others, help you properly present your project and receive funds in a single place. Platforms earn off of a commission they take from funds raised.
Crowdfunding is a viable option, especially when you need extra capital that is easily accessible. In itself, crowdfunding can be a test of sorts: if people invest in your idea, it is likely to see commercial success in the real market.
Angel investors are people or organizations that possess critical business knowledge and expertise and invest into projects they consider viable. An angel investor is not an official status, as anyone can invest into a business in return for a share of profit or ownership.
How do you push your business out there before the investors? An interesting feature in angel investment is that, according to Forbes, investors prefer to have physical access to projects they patronize. One way to find those investors is to actually talk to them through online forums, livestreams and webinars run by successful entrepreneurs that are looking to take on ‘student’ businesses.
Having an angel investor means having a senior colleague and teammate ready to support you with business knowledge and vast experience as well as actual money. One potential disadvantage is a lower level control. If you see yourself as the only leader and decision-maker in the game, partnering up with an angel investor must be backed up with a documented role definition.
How will I track income and expenses
Once money comes in, you won’t miss it. Or so it seems.
Tracking where revenue comes from and what money is spent on is essential for successful business operations. You can rely on manual work and hire someone to manage bookkeeping for your business. Alternatively, you can automate the process by incorporating a system to keep track of all things finance in your project.
What accounting software or system will I use
Accounting software is a cloud service designed to help businesses record, manage, and analyze their financial transactions and data. At its core, it automates essential bookkeeping tasks that were traditionally performed manually, including tracking income and expenses, managing accounts payable and receivable, generating invoices, processing payroll, and producing comprehensive financial reports like balance sheets. Modern accounting software goes far beyond basic number-crunching—it serves as a centralized financial command center that provides real-time visibility into a business’s financial health through automated bank reconciliation, expense categorization, tax compliance features, and customizable reporting dashboards.
Do I need a bookkeeper or an accountant
However smart your accounting software is, it needs a professional to manage it. Of course, as a starting business, your volume of transactions and, therefore, taxable income may not be significant enough to hire an accountant right away. Onboarding to a simple accounting software will do, given you do your sales officially.
Okay, we know what you are thinking. You have not even started sales yet, and you already need something to keep track of revenue. Early, is not it?
Well, it’s pure hygiene, if you will. Scaling is the ultimate goal of any business, and scaling fast requires enough infrastructure in place — from production lines to invoicing tools. Most importantly, growth means bigger teams. Scaling teams comes with EasyStaff Payroll.
EasyStaff Payroll is a contractor management platform that helps businesses focus on work and team building, doing all the heavy lifting of local and international HR management. EasyStaff Payroll helps you hire any contractor, freelancer or even in-house employee on a B2B contract, thus minimizing risks behind international teams management and keeping your business compliant whatever stage you are at as a startup.
What are my startup cost projections
Getting your startup cost projections right is crucial for success. Think of it as creating a financial roadmap that shows exactly how much money you’ll need to get your business off the ground and keep it running until it becomes profitable
How to calculate fixed vs variable expenses
Understanding the difference between fixed and variable expenses is key to building realistic projections.
Fixed expenses are your consistent monthly costs that don’t change based on how much business you do. For example, software licences and subscriptions that your startup works with, office rent and salaries of full-time workers. So calculating fixed expenses means simply summing up current regular spendings.
Variable expenses change based on your business activity and sales volume. Like payment processing fees, marketing spend and shipping costs. To estimate how much a variable expense may be, you need to look into historical data of your business or look up other businesses and their spend, if available..
| Type of Expense | Meaning | Example |
| Fixed expenses | Consistent monthly costs that don’t change based on how much business you do | Software licenses and subscriptions, office rent, salaries of full-time workers |
| Variable expenses | Expenses that change based on your business activity and sales volume | Payment processing fees, marketing spend, shipping costs |
The smart approach for startups is to keep fixed costs low initially while using variable expenses to test and scale. This gives you flexibility to adjust spending based on performance without being locked into expensive commitments.
What tools can help with financial forecasting
For startups on a budget, several user-friendly tools can simplify your financial forecasting process without breaking the bank. Projection Hub can generate three-year financial projections in just 30 seconds and offers a seven-day free trial. Pro-Forma provides rapid, automated financial forecasts for $29 per month, and free spreadsheet templates are available for some locations. Choosing tools that seamlessly integrate with existing accounting software and scale alongside your business is crucial, and because most platforms include free trials, you can experiment with different options before making a commitment.
How to evaluate funding options
Receiving some funding, along with the investor’s expertise and skill, can be a game changer for your startup’s growth. Our kind advice is, don’t underestimate your chance of attracting support from investors, grant programs, or lenders. With the right pitch and plan, you have every reason to qualify for resources you didn’t even know were within reach.
Grants vs Loans vs Equity investment
Grants are non-repayable funds often offered by government agencies or nonprofits, making them ideal if you qualify and don’t want future debt or shared ownership. Loans provide a lump sum you must repay with interest, giving you full control but adding a fixed monthly obligation. Equity investment from angels or venture capitalists provides capital in exchange for partial ownership. There may be no repayment obligation, but profits and decision-making power will be shared with investors.
What are the qualification requirements for each
To qualify for a grant, money you won’t be repaying, your project must make a serious social impact. Loans typically demand a solid credit history, a clear business plan, and sometimes collateral (i.e. an asset the bank will take from you if you fail to deliver on your debt). Equity investors look for strong market potential, a scalable business model, and a capable founding team; they often require a pitch deck, financial projections, and due diligence (i.e. 360-degree checking of the business and the people behind it) before committing.
Managing cash flow effectively
Managing cash flow effectively means more than just keeping tabs on your bank balance. It’s about proactively reading your financial data to anticipate needs, spot trends, and take timely action to prevent shortfalls. By regularly reviewing inflows and outflows, you can identify potential slowdowns before they happen. Effective cash flow management turns raw numbers into strategic insights, helping you stay one step ahead of challenges.
How to create cash flow projections
To build reliable cash flow projections, start by listing all expected cash inflows, like customer payments, loans, or investments, and then map out your anticipated outflows, including rent, payroll, and supplier bills. Use simple templates or software, like Xero or Cash Flow Frog, to lay these figures over weeks or months. To keep your forecast realistic and actionable, fine-tune it with seasonality and growth.
What are early warning signs of cash flow problems
Consistently late customer payments, dwindling bank balances or frequent overdraft fees are burning red flags that scream something is not OK with your cash flow. If you find yourself delaying supplier invoices, tapping into personal funds, or missing payroll deadlines, you want to dig into numbers and figures on your books.
Financial planning best practices
We feel for you: it’s difficult to bring up those ‘best practices’ when you are at step 1 of business. The good news is, you can often borrow or learn from other businesses that have already walked the path you’re on. Studying how peers in your industry handle budgeting, forecasting, and bookkeeping gives you a head start. By consistently trying out different approaches—whether it’s a new expense-tracking spreadsheet or a fresh forecasting template—you’ll discover which processes truly work for your team before locking them in as long-term practices.
How often should I review financial statements
Review your financial statements at least once a month to stay on top of your startup’s performance. A regular monthly cadence helps you spot trends, verify projections and ensure you meet cash flow and profitability targets without waiting too long to catch issues.
What financial ratios matter for my business type
Focus on a few key ratios that align with your industry and growth stage. Common ratios include the current ratio (current assets divided by current liabilities) to gauge liquidity, the gross margin ratio (gross profit divided by revenue) to measure profitability, and the burn rate (monthly cash outflow) to understand how quickly you’re using capital. Tailoring these metrics to your business helps you make informed decisions and keep your financial health on track.
Business Finance Planning FAQ
- How much money do I need to start a business?
Startup costs vary widely by industry and business model, but you can estimate your needs by listing all one‐time expenses (equipment, licenses, deposits) and monthly operating costs (rent, payroll, marketing) until you break even. A simple rule of thumb is to have at least three to six months of operating expenses saved, plus a buffer for unexpected costs. - What are the best funding options for small businesses?
The ideal funding source depends on your needs and stage. Bootstrapping works if you can fund initial costs yourself. Small business grants bring non‐repayable capital but are competitive. Loans offer predictable repayment schedules but require good credit or collateral. Equity investment gives you capital without monthly payments but trades ownership and may dilute control. - Which accounting software is easiest for beginners?
For total beginners, Wave and FreshBooks are often recommended because of their simple, guided interfaces and free or low-cost plans. QuickBooks Online and Xero also offer user-friendly setups and plenty of tutorials, making them a smooth next step as your financial needs grow. - How to qualify for small business loans?
Lenders typically look for a solid business plan, good personal and business credit scores, and at least six months of operating history. Having clear financial statements, realistic cash flow projections, and any required collateral or personal guarantees will strengthen your application. - When should I hire an accountant?
Consider bringing an accountant on board when bookkeeping starts taking up more than a few hours each month, you’re facing complex tax obligations, or you need strategic financial advice—often around the time you hire your first employee, reach six-figure annual revenue, or prepare for your first audit.