7 Finance Thumb Rules for Startups


7 Finance Thumb Rules for Startups

By Jeroen van den Oever

 This tutorial is a short version of a one day training that we organize for technology startups in Switzerland. It describes the basic rules of thumb for finance in startups and aims to help you understand:

·         How to talk the smart language of finance and accounting so you look smart talking to your board or shareholders,

·         How to free yourself from the day-to-day administrative grind, so you can focus on what is most important: growing your business

·         How to protect yourself to typical startup problems, so you dont end up in Court.

These rules of thumb are universal but focused on the Swiss law. Do try and educate yourself whenever you can about finance. It may be boring but it will make a great deal of difference running a successful business. 

Here we go!


 First thing to learn is that you have your private money and your companys money. When starting up these two get mixed up quite often. After opening a separate bank account for your company, make sure you declare all your private expenses related to the company to the company.

Selling to your first client, hiring your first employee, or signing a contract with a supplier are all triggers for you to incorporate a limited company. In Switzerland, these are a SA/AG or a Sarl/Gmbh and these entities are very good in limiting your liabilities. You dont want suppliers to come for your car or your house when something goes wrong in your company.


 As a business, you have the obligation to keep records and prepare financial records. In Switzerland, you can keep your books on a cash basis until you reach a revenue of CHF 500,000 which makes life a little bit easier. You are best to go paperless from the start and use cloud based bookkeeping software like for example Zoho, EZYCount, Sage, Bexio or Xero. You can easily upload your documents to these online environments and keep your desk clean.

Further you have obligations to keep minutes of your shareholders meetings and keep a register of shareholders. It is best to also have these scanned and in your digital files. Keep your admin impeccable as it will save you loads of time and will also help you when you need a loan or investment.


 The Swiss Code of Obligations (CO) articles 552 to 1186 contain most of the rules you must know. This accounting law named the 32nd Title of the Swiss Code of Obligations came effective 1st of January 2013 and is applicable from 2015 onwards (2016 for consolidated accounts).

Some relevant obligations of the Swiss Code are the obligation to keep documentary proof for ten years and the choice of a VAT method. You have the possibility to not put VAT on your invoices if your revenue is below CHF100,000 a year. Do put on your invoices that you are not obliged to charge VAT though, to avoid complications. You better also opt out of the mandatory audit obligation as you are not likely to be big enough. Your revenue need to be higher than CHF40 million, assets bigger than CHF20 million or employ more than 250 FTE on average per year.

The Swiss Code gives you the possibility to carry forward losses over seven years to be compensated with future profits to reduce your tax bill. Do get yourself educated and read the Swiss Code on a rainy day or a Sunday morning. There is also stuff on board member liability and over indebtedness that may ignite your interest (see rule #6).


 The law describes only three elements that need to be reported in financial statements. These include Balance Sheet, Income Statement, and Notes. They all address financials that have occurred in the past. Using these to navigate your company is like steering your car looking through the rearview mirror. So, the most important financial document for you is not one of these three. It is the Cash Flow Statement. Your cashflow is to be tightly managed on a monthly or even weekly basis and forecasted to calculate the runway of the company. 

Cashflow statements should be made and managed by the CEO or CFO of your company and should not be left to an accountant. If you do not know how to create one, ask your accountant to show you how to do it. The cashflow statement contains the money coming in and money going out of your company per week or month. This forward-looking statement will help you find problems before they occur, leaving you time to do something about it. It may be a lifesaver.


 We know time is money and there are only so many things you can do yourself. Do not let yourself get distracted from your business when doing your accounting. Outsource the parts that you do not need to do. Nowadays with cloud bookkeeping software prices to hire an accountant have gone down dramatically and they are easy to use even if you do not have any experience with bookkeeping.

Do not outsource activities as your accounts payable nor your accounts receivable. You should be on top of your customers and your suppliers. Also, keep doing the payments yourself as it gives you a good sense about what cash is going out of your company. Of course, do the cash flow statement yourself (see rule #4). Outsource all the other things like tax filings, end-of-year financial statements and payrolling.

Your goal in life is not to get stuck in bookkeeping. Focus on growing your business instead and fulfil your dreams.


 You should consult a pro when setting up your business and accounting. It will help you win time and avoid problems later. It will cost not more than a few hours to set you up in accounting and check the major risks you may have. An expense well spent.

Further when you foresee problems do not hesitate to hire a pro. In case of over indebtedness or capital loss you have legal obligations to follow like informing your shareholders and sometimes go the judge. It may also lead to insolvency or bankruptcy and board member liabilities (i.c. pillar 1 pension, payable tax and social charges).

Other elements to consult a pro is when you are investing in technology to see if these should be capitalized or expensed. Capitalizing your investment means that the investment will show on your balance sheet as an asset. This is one way of avoiding the over indebtedness mentioned above. Expensing means you take the expense in your income statement as a loss. This loss is a tax deduction that can be carried forward to compensate future profits. Both have benefits and specific rules.


 A balance sheet and income statements are not the priority documents to track being a startup. More important is your cashflow statement which you need to monitor all the time. In addition to these traditional finance documents you are better off tracking several (or all) financial and non-financial KPIs described below.

Most important would be your Customer Acquisition Cost (CAC) and your Life Time Value of the Customer (LTV). These will say something about your future financial health and potential. Related KPIs that measure your financial health and flexibility are CAC Recovery Time and your Overhead Cost relative to Revenue.

Web-based tech startups may find good use in following their Monthly Active Users (MAU), Conversion Rates and Customer Retention rates. Marketplaces also may follow the Gross Merchandise Volume (GMV) as they would only take a small part of this revenue that crosses their marketplace.

In general, there are the KPIs on top level like Runway and Monthly Burn to be followed. These are easily extracted from your forward-looking Cashflow Statement.

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