Good bookkeeping & accounting practices help avoid financial and management pitfalls for a growing small business, Rolf Neuweiler, A2ZCFO (image: money pitfall)

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 each potential pitfall 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.

Pitfall – 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.

Pitfall – 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..

Pitfall – 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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