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In order to realize your company’s growth potential, check out the top five most common financial mistakes companies make. By learning about these mistakes, our hope is that you will not only avoid them but also move to maximize your business success.
Do you have trouble sticking to your budget? Take a moment to consider the cost-benefit of each expenditure and its necessity to the operation of the business. Could that fixed asset acquisition or building upgrade be postponed until a more appropriate time arises?
By regularly reviewing expenses, your company may be able to “trim the fat” and eliminate those discretionary items that do not directly contribute to your business’s bottom line.
Another financial mistake companies make is over relying on credit sales. While selling goods (or providing services) on credit has its benefits, a loosening of credit requirements to increase business could potentially result in a strain on company resources and lost revenue.
For those hard-to-collect accounts, repeated attempts at collection can prove very costly, especially if your company is not in the business of financing or servicing credit. Reviewing credit history reports of customers before approving financing can immensely help to mitigate this risk.
Every employee has payroll taxes withheld and paid to the Internal Revenue Service by the employer. A simple way to hedge against the risk of insufficient funds come payment time is to set up a liability separating those payroll expenses from the general operating expenses. Establishing the liability identifies the future payment to management and prevents those funds from being used elsewhere.
Failure to make timely payroll tax payments can result in steep interest and severe penalties. In an effort to avoid this financial mistake, book that liability or contract a payroll transaction service.
Running a business without a financial roadmap is kind of like planning a trip and leaving the GPS, map, and smartphone at home. There’s a chance you’ll reach your destination, but it’s more likely that you’ll use a significant amount of excess fuel doubling back and changing direction during the journey.
Businesses should set up a sales forecast and an expense budget to help benchmark performance along the way. For trouble sticking to the budget — see financial mistake #1.
Solid and accurate financial reporting is the backbone to business decision-making and the key to success over the long haul. Poor accounting practices and inaccurate data will inevitably hurt performance, and it could increase your company’s susceptibility to fraud. Keeping accurate books to track performance is not only smart, it’s easy. Hire knowledgeable accounting personnel or contract a firm.
Delap is an award-winning, fully integrated financial services firm. Our main objective is to make your business run more efficiently. Whether you’re looking to increase profitability, streamline operations, avoid these financial mistakes, or improve internal controls, our business advisors can create a plan to take you there.