By Rieva Lesonsky
So you think you’re on top of your business’s finances. Maybe you’ve even gotten a bank loan or line of credit. But there are three common financial fails that could be putting your business at risk, according to a new survey by online accounting software company Xero.
Xero asked accounting professionals what their clients’ most common financial errors were, and here’s what they said:
- Not having real-time insight into the business’s finances is the top mistake, cited by nearly 50 percent of accounting professionals.
- Speaking with the company’s accountant only at tax time is number two, cited by 31 percent.
- Finally, the third biggest error, cited by 28 percent, is failing to link financials to business goals.
Don’t make these common mistakes. Here’s what you should be doing:
Get digital. If you’re still doing your books on paper, now is the time to upgrade to a computerized accounting system. Look for one that lets you generate real-time reports and provides “dashboards” where you can see your business’s financial performance at a glance. Consider putting your finances in the cloud, as 67 percent of business owners in Xero’s survey do—that way, you and your accounting professional can access your data anytime, anywhere.
Measure and monitor. Don’t just input your numbers and forget about them—use them to monitor your performance and assess whether you are reaching your business goals. “Look at your company’s financial performance regularly and use backwards-looking financial statements to project forward revenue, expenses and cash flow,” one accounting professional told Xero. “You can’t manage what you don’t measure. Having this knowledge will help you make better decisions.”
Plan ahead. You should also use your financials to project and plan for the future. “It’s important to live in the now, but as a business owner you need to be thinking about, and planning for, the future. If you’re not looking five to 10 years ahead, you are behind the competition,” another accounting professional told Xero.
Harness your accountant’s expertise. Your accountant can do more than just help you cut your tax bill at tax time—he or she can also help you plan the direction of your business and advise you on a raft of daily decisions, such as whether it’s better for you financially to hire employees or use independent contractors; the best time to invest in new equipment or systems; and the best options for finding capital for your business. In addition, your accountant should be a vital part of the equation when you make long-term decisions such as taking on partners or investors, planning for succession, getting ready to sell your business and much more. If you’re only talking to your accountant once a year, you’re selling your business short.