While poor management is cited most frequently as the reason businesses fail, inadequate or ill-timed financing is a close second. Whether you're starting a business or expanding one, sufficient ready capital is essential. But it is not enough to simply have sufficient financing; knowledge and planning are required to manage it well. These qualities ensure that entrepreneurs avoid common mistakes like securing the wrong type of financing, miscalculating the amount required, or underestimating the cost of borrowing money.

Start-Up Financing

Start-up financing is the initial infusion of money that advances an idea or an intention into something tangible.

Best Use:
Commencing initial operation to the point where outside investors can see and feel the venture, as well as understand that you took some risk getting it to that point.

Cost:
Start-up financing will possess two of the following three qualities: good, cheap and fast. It will never possess all three qualities.

Ease of Acquisition:
If you have nothing, it's difficult. If you have personal assets, the hard part is putting them at risk. But doing so is the rite of passage to both success and failure.

Before inquiring about financing, ask yourself the following:

Do you need more capital or can you manage existing cash flow more effectively?

How do you define your need?

Do you need money to expand or as a cushion against risk?

How urgent is your need?
You can obtain the best terms when you anticipate your needs rather than looking for money under pressure.

How great are your risks?
All businesses carry risks, and the degree of risk will affect cost and available financing alternatives.

In what state of development is the business?
Needs are most critical during transitional stages.

For what purposes will the capital be used?
Any lender will require that capital be requested for very specific needs.

What is the state of your industry?
Depressed, stable, or growth conditions require different approaches to money needs and sources. Businesses that prosper while others are in decline will often receive better funding terms.

Is your business seasonal or cyclical?
Seasonal needs for financing generally are short term. Loans advanced for cyclical industries such as construction are designed to support a business through depressed periods.

How strong is your management team?
Management is the most important element assessed by money sources.

Perhaps most importantly, how does your need for financing mesh with your business plan?
If you don't have a business plan, make writing one your first priority. All capital sources will want to see you’re for the start-up and growth of your business.

If you want to succeed in business, you need to know about financial management. No matter how skilled you are at creating a product, providing a service, or marketing your wares, the money you earn will slip between your fingers if you don't know how to efficiently collect it, keep track of it, save it, and spend or invest it wisely.

Poor financial management is one of the leading reasons that businesses fail. In many cases, failure could have been avoided if the owners had applied sound financial principles to all their dealings and decisions. Financial management is not something that you can leave to your banker, financial planner, or accountant _ you need to understand the basic principles yourself and use them on a daily basis, even if you plan to leave the more complicated work to hired professionals.

Before inquiring about financing, ask yourself the following:

Managing your business finances is one of your most critical tasks. Are you getting your financial statements regularly? Are they complete, timely, and accurate? Neglecting good accounting habits can be dangerous to your financial health.

Or do you have the statements but haven't studied them or acted upon them yet? Remember what kind of a sin sloth is? Yes, we know it's boring detail work but it's necessary boring detail work. You can't fix what you don't know about. Ignorance is definitely not bliss!

Here are some downloadable forms that may help you to control your accounting chores; tools that may help you get better control of your finances:

• a trial balance worksheet template
• a balance sheet template
• an income statement template