Of all the small businesses that fail, only 10% go bankrupt. The other 90% make a conscious decision to close their doors. Most just throw in the towel. You may be asking, why do so many business owners give up?
In my experience, I can tell you that 50% of the reason why your business is not thriving is financial management related. Let’s discuss (3) reasons why your business is not working, and what you can do to turn it around.
Your bookkeeper is not an accountant….or a CFO.
Many business owners think that by hiring a bookkeeper they’ve got their accounting and financial management covered. This is a MYTH. An experience with a new client illustrates this point.
The client called me because he felt he didn’t have control over his business. He didn’t know what his numbers were, didn’t know how profitable each of his services was and how profitable individual jobs were. The bookkeeper set him up on QuickBooks but did not configure it in a way that would produce useful information. Nor did she record transactions in a way that insured useful information could be obtained. In addition, the bookkeeper did not know how to produce financial statements following accepted accounting principles. My client has a situation where he invoices his customers for half the job up front and then produces progress bills thereafter.
A project may take 2-4 months to complete. His current system recognized all of the revenue upfront rather than as it was earned (as work was performed). The income statement showed wild swings in revenue that did not reflect the company’s effort and did not match the expenses incurred to produce revenue.
The point here is not that my client’s bookkeeper was incompetent, but that it’s simply unfair to expect a bookkeeper to exhibit the diligence and aptitude required, to organize and manage business finance in a way that aids decision-making.
The best use of a bookkeeper is in conjunction with a financial team including an accountant, comptroller and CFO. Sounds a bit. The CFO provides the direction and experience needed to effectively manage a business’s finances, and the bookkeeper provides the day-to-day administrative skills needed to run an accounting department.
Utilize Your Accounting Software to Support You
When you think of accounting software, your eyes probably glaze over. You don’t have time to research and shop accounting software. But the truth is, you need to be sure the tools you are using for data entry, forecasting, and reporting are supporting your unique business needs.
Take QuickBooks for example; it’s the country’s most popular accounting software because of its ease of use and excellent reporting capabilities. It even offers automatic set-up. Sounds great, right?
What if I told you there are custom settings that can tell you what your best-selling products and services are in real-time? Or tell you the amount of revenue derived from referral sources and how much cash you will need to fund in business in the coming week or months?
A financial team doesn’t have to cost a fortune
A study done by Dunn & Bradstreet concluded that if business owners did only one thing they could improve from a 90% failure rate (during their first four years of business) to a 90% success rate. That one thing is to hire professional help. Since 50% of the reasons why businesses go out of business are related to financial management, it only makes sense to hire a team to help you manage it.
A financial team should consist of a bookkeeper, accountant, controller, and a CFO. Four extra employees, salaries, benefits sounds pretty pricey right?
It doesn’t have to be
At Clarisent™ our financial team can help your business thrive and grow at a fraction of the cost you would pay for an in-house financial department. We offer reliable support, flexibility, problem solving, and strategic planning. Best of all, our focus is on the goals of our clients, not just the bottom line. We are about the lives that the numbers serve.
When you truly understand where you are on the path to a financially healthy business, you become a clear and trusted leader in your business. Let us help you get there.
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