Four Financial Pitfalls That Derail SMB Companies

BAnanaBusinesses may understand what their clients and customers need, but cannot sustain consistent growth without a complete, continuously updated financial picture. We’ve seen this happen time and time again; even a business that can overcome challenges and obstacles to deliver a great product cannot survive for the long term without financial acumen.

I’m a glass half-full kind of guy, but I do think there are four primary financial concerns that cause small- and medium-size businesses (SMBs) to fail:

#1: A lack of timely, accurate and insightful information. It may seem cliché to say you have to know where you’ve been in order to know where you’re going, but you have to have the very best financial information to make more informed decisions. Most of the time, the focus is on your profit & loss statement (P&L).

Is your P&L a laundry list of expenses or an accurate, insightful summary of properly grouped activities, separated between discretionary and fixed? Are you getting daily or weekly directional indicators on sales? How about last months’ data in time to change your course for the current month? Do you have a basic forward looking view of where the business is headed? If an SMB is regularly using something as rudimentary as its bank accounts to operate, then it is a clear sign that its accounting system and personnel are not providing the necessary financial information.

#2: No reporting or the wrong kind of reporting. Numbers tell a story, but they can’t be used for short- or long-term decisions if you can’t understand what the figures are trying to say. Complex Excel spreadsheets just don’t cut it. Instead, many companies should rely on real-time daily dashboards. Here, businesses should be able to drill down to any level of information they want. The bottom line is that the information should always be accessible and useful, all at a glance.

#3: Too much time is spent on tactical versus strategic activities. If you do not have good accounting data to analyze, you’ll constantly be reacting and making tactical decisions. There’s a much better way by being more strategic, using your accurate financial information to project performance, make investment decisions, and decide what projects to pursue and at what pace. What are the trade-offs that you need to make and at what cost? At a minimum, you can see how your thoughts equate to your spending. For example, can you afford to relocate the office in the next three months or spend money on a new product rollout?

#4: Lack of processes and systems to help scale the business. Finally, your growth rate comes down to one, basic question: can you handle your growth? One of the best things you can do for your company is to define the processes and systems you’ll need in order to grow and succeed, but scalability is also important. Look for software and systems that support your needs now, of course, but also two years from now. Ensure your systems are scalable so they will not hinder your ability to grow your top line and monitor results.

Without a doubt, many businesses are growing organically and may even be doing well in terms of using the financial information they have. However, imagine how much better the company would be, and how much happier your stakeholders will become, if decisions are made based on a more accurate picture of where the business is today and where it is headed.

Mike Banks is a CFO Advisor/Executive Partner at Consero Global LLC. Contact him at

Deliverables include:

  • Overall health assessment of your accounting and finance department
  • Unbiased suggestions on improvements
  • System optimization
  • Consero proposal

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