Metric – The most founder friendly finance app in the world!


How to Lower Operating Expenses of Your Business

For most ambitious startups, the unexpected COVID pandemic has delayed many business plans causing financial stress. To get up and running again, your startup needs a well-planned recovery strategy!   A logical way out is to lower operating expenses. Spending less money on operating costs will enable better success in this uncertain time for your Pakistani startup. If your business plans have been minimally affected by the COVID pandemic, it will still help you to cut recurring expenses and become more lean.   The plan to reduce operating costs is a hefty issue. Hasty decisions on cutting corners without thoughtful consideration can backfire, thereby causing financial loss instead of gain.   The following are some factors to consider on reducing costs for your Pakistani startup:   Review the Operating Budget  When your startup chalked a business plan two years ago it did not take into account an upcoming pandemic. Global economic changes will inevitably happen after the pandemic subsides. Start reading and analyzing changes that will affect your business post-pandemic.   Next review the budget taking notes of what is no longer relevant to operate efficiently. Prioritize from sales to marketing to customer retention with decisions based specifically on your startup. This will enable you to review the budget based on current economic conditions.   Reconsider Huge Investments  Review the budget giving huge investments proposed prior to COVID-19 careful thought. As the world globally recovers from the pandemic, be overly cautious instead of ambitious. Keeping cash at hand it is easier to accommodate unforeseen expenses.   Reconsider proposed capital investment for Startup growth such as new equipment or facility. Does it make sense to postpone these until the market stabilizes?   Re-Negotiate Business Contracts, Terms, and Agreements  Most organizations have been impacted by COVID-19, giving you the opportunity to re-negotiate business contracts and agreements. Re-negotiate the rental contract with your landlord, speak to vendors, professional services, insurance agents, loan equipment providers and so on. Negotiate out of early termination penalties for those services that are no longer within budget.   It is not always easy to negotiate out of legal contracts or have new terms outlined but there is the possibility of gaining temporary adjustments, discounts on fee or services and delayed payment cycles.   Re-Evaluate Business Software, Products, and Services Take an inventory of all software, products, and services that your startup needs to operate on and the cost of each. This will enable you to prioritize what is absolutely essential and what can wait as these occupy a major portion of the budget. You might discover duplicate software, excess products or services. Eliminating excess can reduce Startup operational costs. Make sure you consult with all concerned departments during this process to avoid any complications. You should not eliminate something that will cost you more in the long run!   Minimize Payroll Expense Payroll is a major expense for most startups. Research ways to effectively reduce payroll costs to stay afloat during the first phase. See if there are government programmes and initiatives that will help.  Re-evaluate team bonuses and other employee perks and benefits and add them as your business later thrives. Do your best not to reduce headcount or reduce salaries.     Interested to learn more about how to reduce operating costs for your startup effectively? Contact us at Vixperts today for the best accounting, bookkeeping, and financial consulting services!

How to Lower Operating Expenses of Your Business Read More »

Understanding Your Company’s Cap Table

When you’re starting a new business, there is a lot to consider. Gathering capital, selecting investors, and hiring employees are all essential activities for new startups. However, it is important to be cognizant of your funds, assets, capital, and fair market values. Many new business owners dive in head first without taking a minute to organize their finances. However, taking a step back to create and maintain an accurate cap table can prevent a lot of trouble in the long-run. What is a Cap Table? A capitalization table, commonly referred to simply as a cap table, is a list of all the securities your company has issued and who owns them. Securities include common equity shares, preferred equity shares, stock, convertible notes, warrants, and equity grants. In the simplest terms, a cap table is a record of who owns what inside of your business, including stock, shares and assets. Typically, a cap table will include the following information: Names of shareholders Number of shares (both common and preferred) Fully diluted shares Percent ownership Stock class Price per share Value At the same time, the capitalization table will also show a breakdown of the total number of shares in the company, including: Authorized shares Outstanding shares Unissued Shares Shares reserved for stock option plan Having a neat and organized cap table is very useful. Firstly, it is used to show investors before they put any money towards your company for their due diligence. It also makes valuation of your business and its financial position much easier. By maintaining a neat and organized cap table, you can see how many shares you have available in your option pool at any given time.  It prevents you from overselling or underselling shares. Cap Table Mistakes to Avoid Now that you understand what a capitalization table is, and its importance for your Pakistani startup, let us take a look at the major cap table mistakes that every new business should avoid. Not Regularly Maintaining the Table As a rule of thumb, you should update your capitalization table any time there is a chance in the stock ownership of your company. Failing to maintain this record in real time can create a lot of confusion and headaches down the road. To avoid this mistake, update your cap table after any of the following events: Financing Liquidity changes Employee grants Option exercises Employee termination Not Using Proper Software Tools When you first start out, it may seem simple enough to maintain the record on a standard Excel spreadsheet. However, as your business grows there will be many financing changes, and manually maintaining the table will become too difficult. Therefore, you should look into getting a proper software tool early on. This will allow you to automatically update the table whenever there are changes, and will reduce the risk of inaccuracies. Entering Inaccurate Information We cannot stress enough on how important it is to enter complete, accurate information in your capitalization table. Failure to do so can cause a lot of wasted time tracking down the correct information in the future. Therefore, be very conscious of entering true and accurate information. This includes correct financial information, as well as complete shareholder names and data. Need more help with drawing up a capitalization table? Get in touch with us!

Understanding Your Company’s Cap Table Read More »

What is a Company’s Burn Rate and Runway?

New businesses are in a delicate situation where they are not earning revenues. However, they are spending money to invest in equipment, pay expenses, overheads, and more.   Therefore, it is very important for Pakistani startups and new businesses to keep track of the money they are spending. It is also necessary to understand exactly how much money they can spend before going bankrupt.   Burn rate and runway are two calculations that are useful in this situation. It is used by startup companies and investors to track the amount of monthly cash that a company spends before it starts generating its own income, and how long they can continue to spend that money before going bankrupt.   Here’s what you need to know to understand “burn rate” and “runway”   What is “Burn Rate”? Burn rate is a measure of how quickly a business is losing, or burning through, their venture capital (money). It helps them understand how long they can continue spending this amount of cash before running out.   In other words, burn rate is the actual amount of cash your account has decreased by in one month. This usually describes a company’s negative cash flow.   How to Calculate Burn Rate Calculating burn rate is very easy and straightforward, especially if you have a cash flow statement on hand.   Burn rate is calculated using the following formula:   Burn Rate = (Starting Balance – Ending Balance) / # Months   Starting balance refers to the amount of money that you have at the start of the period. This is subtracted by the amount of money that you have by the end of the term. The number of months refers to how many months are between the starting and ending balance.   EXAMPLE: Starting balance = 500,000 Ending balance = 200,000 Months = 2 months   Burn Rate = (500,000 – 200,000) / 2 = 300,000/2 = 150,000   Therefore, the burn rate is $150,000. The company is burning through $150,000 over the given time period.   What is Runway? On the other hand, runway refers to the amount of time a company has before it runs out of cash.  Burn rate is actually used in order to calculate the runway.   This is because burn rate reflects the net cash that your business burns through in a given time period. Hence, you can use that data to see how many months it would take before you “burn” through your cash balance   How to Calculate Runway: Calculating the runway is very simple. The first step is to calculate the average burn rate, using the formula given above.   Next, you can use the following formula to calculate runway:   Runway = Total cash balance  ⁄ Average burn rate = # months before you run out of money   Total cash balance refers to the cash you have on hand, while average burn rate is the amount of money that your company spends, on average, in a given time period.   Example: Total cash balance = $600,000 Average burn rate = $150,000   Runway = 600,000/150,000 = 4 months before the business runs out of money   Therefore, the runway is 4 months long. The company has 4 months before they run out of money.   The Best Financial Services in Pakistan Now that you know how to calculate burn rate and runway, you will be able to gain valuable financial information for your company’s future. If you are interested in gaining more financial knowledge and benefitting from expert accounting, bookkeeping, and financial services, contact us at Vixperts.   We offer virtual CFO, financial modelling, valuation, accounting & taxation, investor due diligence, and policy control design. Contact us now for a free valuation and diagnosis of your company’s financial health.

What is a Company’s Burn Rate and Runway? Read More »

5 Financial Management Mistakes Startups Make

Effective financial management is the lifeblood of any business. And for new startups, having good financial management is a matter of survival. Pakistani startups that are unable to manage their finances and bookkeeping are often unable to witness healthy growth and profits.   Hence, bookkeeping, budgeting, and accounting are all necessary for monitoring your company’s financial health. It is a detail-oriented job that can be tricky to grasp, especially for new startups.   So, to help you out, here are the top 5 financial management mistakes to look out for:   Top 5 Financial Management Mistakes Startups Make   1. Mixing Personal Finances with Business Finances This mistake can not be stressed upon enough. So many new startups make the grave mistake of mixing their personal funds with their business capital. Some even go as far as keeping their business finances in their personal bank account.   This not only causes a huge amount of confusion and muddled accounting statements, but it creates the huge risk of spending business money for personal uses, and vice versa. Most complicated of all, it creates a huge headache when it comes to filing taxes for your business.   Avoid this mistake: Create separate financial accounts for your business, starting from Day 1.   2. Using Single-Entry Bookkeeping Accountants use double-entry bookkeeping, in which transactions are either debited or credited. This paints a clear picture of your company’s financial health, makes it easier to trace fraud, and allows for accurate tracking of finances. Moreover, with double-entry bookkeeping, you can immediately tell when there is an incorrect entry, as the debit and credit totals will not be balanced.   However, most small startups who are unfamiliar with accounting principles opt for a single-entry bookkeeping style. This is where all transactions, whether inflows or outflows, are recorded in a single account. The reason why doing this is harmful is that it causes messy bookkeeping. It also makes it very difficult to track when mistakes are made in the statements and makes fraud difficult to detect.   Avoid this mistake: Adopt a double-entry system early on. Get help from a knowledgeable accountant if you are unaware of the system.   3. Not Using Accrual-Based Accounting Most new startups record what is known as “cash-based accounting”. This means that they only record transactions where actual cash is involved. For example, if a sale is made in February, but the customer does not pay until April, the business will only record the sale in April.   However, accrual-based accounting practices allow you to see the complete picture. It records account receivables and account payables, therefore allowing you to see the true position of your company. It gives you a heads-up for any expenses that you will need to eventually pay, and shows how many sales you are making regardless of whether customers pay through credit.   Avoid this mistake: Always consider accruals when recording transactions.   4. Not Paying Attention to Finances Many entrepreneurs and new business owners have a million things to do. And for a lot of them, they are more focused on the product or service, rather than operations that are vital for the success of the startup.   Therefore, many new businesses make the grave mistake of ignoring their bookkeeping, accounting, and financial responsibilities. Or, they try to handle the books themselves, and are eventually unable to. Eventually, they end up with a huge pile of messy records, and no way to figure out what the company’s true financial position is.   Avoid this mistake: Find someone who can dedicate their time to maintaining accurate financial records for your startup.   5. Underestimating the Importance of Experts The importance of bookkeeping, accounting, and financing is often overlooked. This is the downfall of many new Pakistani startups.   By underestimating the importance of experts, business owners allow financial records to be neglected, or incorrectly kept, until tax season comes along as they are left with a huge mess.On the other hand, taking help from experts early on can avoid any confusion, fraud, and tax grievances.   Avoid this mistake: Realize when you need help and don’t be afraid to consult bookkeeping experts.   Now that you understand the top 5 financial management mistakes to avoid, you can make wiser decisions for your businesses finances. For more help, contact us at Vixperts for a FREE Diagnosis of your Startup’s Financials today!

5 Financial Management Mistakes Startups Make Read More »

What is a Virtual CFO and why you need one

A chief financial officer (CFO) is an individual who is responsible for managing all the financial actions of a company. This includes tracking cash flows, bookkeeping, creating accurate financial statements, managing tax liabilities, and financial planning.   The CFO plays a huge role in making sure that your finances are managed effectively and that all incoming and outgoing transactions are tracked accurately. Hence, for many small Pakistani startups, hiring a CFO is considered a huge milestone.   At the same time, keeping a CFO employed in-house can be extremely costly, especially for new startups and small businesses that don’t have huge cash flows to speak of. In such cases, it is extremely beneficial to recruit an outsourced or virtual CFO.   What is a Virtual Chief Financial Officer (CFO)? A virtual CFO is an outsourced service provider that performs the usual functions of a Chief Financial Officer. An outsourced CFO, however, offers the services remotely through phone calls and video conferences, and usually on a part-time basis.   The virtual CFO will perform all the functions that a full-time financial officer usually would, including:   Monitoring and reporting on financial metrics Reviewing and analyzing major KPIs Building and maintaining a budget Forecasting financial inflows, outflows, and trends Creating future financial plans Regularly evaluating financial hygiene Providing fair, impartial, and legally grounded financial advice Making recommendations to improve your financial position based on the business plan Creating, reviewing, and analyzing financial reports and cash flow statements Overseeing tax liabilities and making sure dues are paid on time   How Can a Virtual CFO Help Pakistani Startups? Many small businesses struggle with limited funds. Therefore, it is extremely helpful to have a financial officer that can maintain their budget and help ensure that there is no overspending.   However, hiring a full-time chief financial officer is a relatively large cost in and of itself. Hence, it helps to hire a virtual CFO that provides all the same services, at a fraction of the cost.   Cost-Effective Solution The cost of hiring a virtual financial officer is much cheaper and feasible for small businesses. It also helps small startups avoid the hefty overhead expenses that come with hiring full-time employees.   Time Effective Solution For small businesses that do not have huge inflows and outflows of cash, hiring a CFO on a contractual basis is also more time-effective. It also saves time to have a financial expert that can provide concrete advice on budgeting, forecasting, and making business plans, which is something that many new businesses lack.   Where to Find the Best Virtual CFO Services in Pakistan Pakistani startups harness the great potential for expansion, revenues, and profits. However, financial expertise is a key to attaining this success. Here at Vixperts, we help Pakistani businesses build fantastic businesses and raise millions of dollars in investment!   Contact us today to learn more about our financial, accounting, and bookkeeping services. This  includes virtual CFO, financial modelling, valuation, accounting & taxation, and investor due diligence. Get in touch now!

What is a Virtual CFO and why you need one Read More »