The Indian startup ecosystem is experiencing a revolution. According to the Department for Promotion of Industry and Internal Trade (DPIIT), India had the third-highest number of startups globally, around 90,000, in 2024. Unfortunately, the growth of young companies is countered by one major negative factor: approximately 80% of Indian startups will be closed down within the first five years. Do you have any idea who's behind it? The main reason is the absence of adequate operational cost management.
If you disregard operational costs, the business may collapse. There are various areas like making payments to the supplier, purchasing software subscriptions, and salaries, that still have efficiency problems and neglect can cause great financial losses.
What we want to bring out are the top five reasons why Indian startups face difficulties in managing their operational costs and the effective strategies to solve their issues by using technology like Billcostro, which are discussed in this blog.
Also read: How Does Billcostro Help Companies Save on Operational Costs?
The Issue:
During the startup phase, many expenses occur, including business travel, food, accommodation, office supplies, etc. In a situation where the startup is managing tracking through Excel or paper receipts, the repercussions of errors, fraud, and missed reimbursements are a common occurrence.
These "invisible" leaks may seem minor but add up substantially.
The Statistics:
According to the latest KPMG India study, 38% of startups in 2023 had a problem with operating cost leakage due to poor expense tracking software that can inflate monthly burn rates.
The Solution:
Utilize automated reimbursement processes. Such as Billcostro, tools not only enable the digitization of expense claims but also help start-ups with automated approval hierarchies and real-time dashboards, thus reducing human error and fraud.
The Issue:
Many startups habitually transfer money to vendors in advance without specific payment terms or have poorly defined payment terms. Without a milestone-based release system, startups leave themselves open to the possibility of paying for unsatisfactory or even undelivered work.
The Statistics:
It is estimated that a 2024 NASSCOM report on startups showed that approximately 29% of startups at an early stage faced conflicts of interests or disputes due to insufficient compliance with vendor contracts, resulting in losses.
The Solution:
Design the payment plan to be based on the project deliverables. Apart from rewarding the team based upon the project's phase that they have reached, Billcostro contracts with these flows so the money stays protected and only the conditions that are met can let the money go — which, in turn, enhances an environment of trust and lowers the chances of disagreements.
The Issue:
So many startups use manual processes to pay their suppliers that they face challenges not only in GST input claim errors, missed due dates, and duplicate payments but also other inefficiency problems.
The Statistics:
It was shown in a 2022 survey conducted by EY India that 1 out of 3 startups are unable to utilise available GST credits. This was found due to invoice discrepancies and the late filing of GST returns. The losses can be up to Rs. lakhs per annum.
The Solution:
Install the automated GST invoice matching system. You can use Billcostro’s smart invoice parser that auto-fetches the details, cross-references them with purchase orders, and ensures compliance with GST, saving time and money.
Read more: 5 Reasons to Choose Billcostro for Your Business Expense Management
The Issue:
Office devices, computers, and other fixed assets are usually overquantified or not fully utilized most of the time. As a result, lack of central tracking leads to theft, misplacement, or inventory, which eventually leads to money loss. There is different equipment in the office, and the employees have to be able to keep track of it.
The Statistics:
The 2023 FICCI report predicts that startups in India lose 10-12% of their asset value annually because of weak tracking.
The Solution:
Keeping a digital asset register is the answer. Control your assets' lifecycle by using a platform like Billcostro to label, assign, and track assets so they do not get lost and are used efficiently in various departments.
The Issue:
Many startups lack real-time budget visibility, leading to individual team overspending on marketing, tools, or hiring without aligning with the company’s financial goals.
The Statistics:
Startup Genome’s 2023 report found that 70% of failed startups attributed part of their downfall to uncontrolled burn and unmonitored departmental spending.
The Solution:
Enable centralized budget tracking. Billcostro integrates with accounting tools and provides real-time dashboards, alerts on budget overruns, and role-based spending controls—helping finance teams stay one step ahead.
| Problem Area | Impact on Startup Finances | Common Mistakes | Solution with Billcostro |
| Reimbursements | Inflated burn rate, fraud | Manual tracking, no approvals | Automated claims, approval workflows |
| Vendor Payments | Paying for undelivered work | No milestone linkage | Milestone-based releases tied to deliverables |
| GST and Invoices | Loss of input credit, compliance penalties | Manual matching, late filing | Auto-GST matching and compliance alerts |
| Asset Misuse | Capital erosion | No asset tracking system | Digital asset register with user accountability |
| Budget Overspending | Departmental overrun, cash flow stress | No real-time budget visibility | Budget caps, alerts, centralized financial dashboard |
Billcostro is an expense management and vendor workflow tool built for Indian SMEs and startups. Its intuitive platform addresses the very cost leak issues mentioned above. Here’s what sets it apart:
With features built specifically for the Indian regulatory and operational landscape, Billcostro ensures your startup operates lean, smart, and in full control of its finances.
Keeping operational costs under control isn't only about saving money—it’s about fostering financial discipline and endurance from the very start. Given the more competitive nature of the Indian startup landscape and the increasingly thorough examination from investors, a strong expense management strategy is unquestionable.
By addressing the top five expense leak areas by using automation and smart workflows, startups can close the financial gaps, improve cash flow, and lengthen their runway. Besides, tools like Billcostro are perfect for startups to change from being on the receiving end of cost control to being the master of their financial intelligence.
Ready to stop the leaks and take control of your startup’s finances?
Start a 30-day test run with your vendor workflows at Billcostro. - Click here
