These common financial errors can help ensure your startup does not die.Startup life can be chaotic. The reality is that while investors continue to flood the startup world with their enthusiasm for finding the next unicorn, 90% of startups fail. This includes more than half of those that go under within the first three years.Two companies I founded (Mezi & Dhingana) were a success. I faced many of the same issues new founders encounter, but learned from them and persevered. I founded a third Zeni using the knowledge I gained in previous companies to help founders make better, more sustainable financial decisions.Many founders don't understand the financial complexities involved in running a business after a revolutionary idea or initial investment.No matter if you're just wrapping up your seed round or moving on to Series B. Avoiding these common problems is the best way for you to make sure that youre on solid ground so that you can focus on your vision.Why most startups failThere are many reasons startups go under. Many fail to reach product-market fit in an scalable manner. Others simply run out of cash. Although the first two are the most common reasons startups fail, they can also be related. You will eventually run out of money if you don't solve a problem in the market or generate customers.Many startups fail because they don't have the right idea. They are led by brilliant entrepreneurs with great ideas. Many founders don't understand the financial complexities involved in running a business.There are three main obstacles that founders must overcome when trying to understand business finances.Financial systems fragmentation. Time-consuming manual tasks. Inadequacy of financial insight in real timeAll of these issues increase founders' workloads and can cause burnout. On average, owners spend 40% of their work hours on administrative tasks such as payroll, HR, and hiring. Although hiring is an integral part of a founder's day, administrative tasks such as payroll, finance, and HR can distract them from their overall vision and goals.It is possible to solve the problems by becoming aware of them. This will help you avoid burnout, distraction, and ultimately failure. Let's discuss how.Reconsolidate fragmentationMost startups' financial decisions and tasks start with their founder. Bookkeeping, invoicing, billing, projections, taxes, employee payments, and bill paying all become a problem. To achieve their goals, each function requires another employee, vendor, or third-party expert financial firms, admins CFOs, CPAs firms, and each uses its own software and apps.Each party reports back to the founder. The founder is responsible for making sense of the data and communicating it to those who need it. This can lead to communication problems and slowness.Even worse, cash flow problems are created when bills go unpaid, invoicing goes unpaid, and financial documents are delayed. Ive seen revenue go unreported and invoices unsent and uncollectable due to the fragmentation-bottleneck system most founders experience.
