Financial management is a challenge for many small business owners. However, ineffective financial management can have a direct, negative impact on your bottom-line and your ability to grow profits in the future. It’s imperative that you prioritize financial management for your business.
According to an infographic from Intacct (shown at the end of this article), there are seven deadly mistakes of financial management that could doom your business to failure. Fix these mistakes, and you’ll have a much better chance of success.
1. Scattered Business Data
As the infographic explains, scattered business data is making the problem of closing the business books each month harder and harder. Today, we have so much data to manage that aggregating all of it and making sense of it has become a gigantic task. Invest the time (and money if necessary) into streamlining the data collection and analysis process, and not only will your financial management improve but so should your business.
2. Departmental Silos
No business reaches its full potential if everyone is operating within a silo, and financial management processes are not immune to the dangers of silo operations. If the people (or person) who maintains the financial books can’t collaborate with the people who have to give the financial team (or person) the data, then financial management will suffer. Productivity will decline, mistakes will increase, and success will be limited.
3. Spreadsheet Reliance
The infographic warns, “Spreadsheets are time consuming and full of reporting errors.” In fact, 88% of spreadsheets have errors. However, 89% of companies are using spreadsheets for budgeting, planning, and forecasting. Reduce your reliance on spreadsheets and you’ll be more productive and see errors decline.
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4. Poor Expense Tracking
How accurate is your expense tracking? If you’re like most small business owners (and employees), your answer to that question is probably, “It’s not very accurate at all.” Inaccurate expense tracking is a cog in the financial management wheel, so develop streamlined processes to make expense tracking as timely and painless as possible.
5. Outdated Financial Data
How current is your financial data? How much of your time (or your CFO’s time) is spent doing accounting tasks rather than making strategic financial decisions? Believe it or not, more than 50% of a CFO’s time is spent doing accounting tasks rather than making strategic financial decisions according to the data in the infographic below.
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How much is your time or your CFO’s time worth? Should you or the CFO really be spending your time doing accounting tasks that could be delegated to a more affordable employee or contractor? Or should you be spending your time making financial management decisions that will set your business up for success for many years to come? Develop processes to gather and track historical data in a more streamlined process, and free your time (or your CFO’s time) to make the important decisions.
6. Lack of Compliance
Did you know you could get into a lot of trouble if your accounting, reporting, and financial management is inaccurate? To make matters worse, regulations change often, so maintaining regulatory compliance is a never-ending challenge. Make sure you have a comprehensive financial management system in place to reduce the risks associated with noncompliance.
7. Antiquated Technology
Would it surprise you to hear that 52% of senior executives in the United States believe that the biggest obstacle to improving the effectiveness of their financial management was outdated technology? Maintaining outdated IT systems reduces productivity and leads to higher long-term costs. Avoid this problem by using current technology.
Check out the infographic from Intacct below for more details about the seven deadly mistakes of financial management so you can avoid them! What would you add to this list? Leave a comment and share your financial management mistakes to avoid.