Financial and management pitfalls for a growing small business, by Rolf Neuweiler, CFO. Good bookkeeping and accounting practices not only can avoid many problems to make it easy for tax filings, new loans, and pitching to investors, but they will also provide insight into the operation and health of your business enabling sound decisions for management and growth.

Financial and Management Pitfalls for a Growing Small Business – Part 1 of 2

Part 1 of 2: PITFALLS FOR A GROWING SMALL BUSINESS

In January 2019, I talked about financial and management pitfalls for growing small businesses at a professional networking group meeting. Here in Part 1 of the two parts, we first focus on potential pitfalls related to lacking strategic goals and skills. In Part 2 next month, I will list some pitfalls related to leadership, internal teams and professional advisory, as well as staffing, legal & insurance issues.

Please note that the lists are not exhaustive.

Pitfalls – Lack of Strategic Focus

Not understanding your business’s financial model.
Getting bog down in daily work, fire drills, crisis management, etc. vs. being strategic leader – lack of leadership and strategic focus.
Allowing fund raising, mergers, and other events to distract from focus on growing business.
Obtaining business partners, investors who are not a good fit for your organization – VC and other investors’ financial goals are different from founders’.
No succession plan or starting a plan too late. It can take 5- 7 years to implement a plan fully.

Pitfalls – Financial Risks

Lacking strong financial and cash flow planning – budgets, multi-year forecasts.
Lacking financial capital and credit management – bank loans, private investors.
Lacking profitability –no strategies to minimize for taxes; poor lifestyle choices.
Putting all personal assets into one basket – the company.
Overvaluing Company – Many ways to value and view company – Asset Market Value, FMV, Synergy Market Value, Public Value, etc..

Pitfalls – Lack of Financial Skills

Not understanding or utilizing financial statements, cash flow statement missing.
Unclear Business Performance Measurement – KPIs.
Accrual versus Cash Accounting – off book transactions.
Cash Flow versus Debt financing – financing growth, receivables, collections.
Confusing Profit Margin with Sales Mix.
Accounting processes slow or significantly behind.
No budgeting.
Poor personnel and inventory management.

To be continued in Part 2 in the next blog post.

As a fractional Chief Financial Officer (CFO), I provide consulting services to nonprofits, family offices and small to mid-sized businesses. I am the trusted financial advisor providing accounting, finance, human resources, and IT management services so my clients can focus their attention on their customers.

Salient Items while working with a2zCFO:

Works at client’s location and directly with client’s staff;
Affordable and flexibility in hours – 4 hours a month to short term full time assignment;
Excels at messy and difficult clean up situations;
Meaningful financial reporting for management, bankers, and CPA’s. Tax returns completed by 4/15;
Cradle to grave services – from bootstrapped startups to exit transition service experience.

By providing trusted financial advice, I create financial and goal clarity, resulting in increases in cash, profitability and sales all the while preparing the business strategically for a successful exit when the time is right.

Please call me (925) 216-5058 or email: rolf@a2zCFO.com

A2Z CFO, we keep your ship on course.

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