C-Leveled On the Level

By Denise DeSimone, C-Leveled

Between 2016 and 2017, more than 5% of surveyed businesses ceased operating because of inadequate cash flow. In fact, as many as 25% of businesses fail within their first year, 36% fail after their second year, and by the end of their fourth year in business, 50% of businesses have failed. Financial management is one of the hardest aspects of running any business. Sure, it’s easy if you’re a human calculator with a photographic memory. For most though, keeping up with company finances can seem like a daunting task. This is especially true as your business grows and the work it takes becomes even more complicated.

Just like in other areas of your business, in order to remain competitive, you need to keep up with continuously advancing technology. It is also essential for financial management. The right financial data analysis software can provide you with everything you need in one small and easy to use package, making it easier to manage cash flow and financial performance.

So, what can happen if you don’t have a handle on your cash? The short answer is a lot. Here are some of the worst cash-flow mistakes a small business owner can make:

Overestimating future sales: Too many business owners overlook past data and market trends, instead riding along on intuition and pure optimism alone. You may be smart, but no one is a psychic. You need to accurately calculate the value of your company and predict profit margin in order to run a successful business, applying quantitative forecasting methods using past revenue data from other businesses in your industry as a foundation for tracking trends and anticipating future sales.

Spending recklessly: They say, “it takes money to make money,” and while this is often true, there is certainly a limit. Budget planning is essential to make sure you are spending your resources on expenses that will benefit your company’s profitability. It is not always easy to see, which is why a budgeting software can be so useful.

Being too laid-back about past-due receivables: You must keep track of unpaid invoices. Not only that, you need to be proactive about collecting payment. Don’t let your clients take advantage of you. Racking up too many unpaid invoices will inevitably result in a serious lack of cash flow.

Not keeping backup cash on hand: You never know what could happen. If your business consistently has a zero account balance, one month of slow sales could mean instant disaster. Make sure you always have an account balance of at least two months of operating expenses so that if you do experience sudden cash flow obstacles, you have reserves in place to support yourself until you are back on track.

If you have not yet invested in financial software, do so immediately. It could mean the difference between a booming business and an epic financial fail. Analytics are essential for corporate growth. Financial analytics software that takes into account available credit, outstanding loans and liabilities will help make sure you have enough capital to maintain growth.

Whether you’re a business owner with existing financials or a new startup, a strong financial tool will give you the insights you need to make better decisions:

1. Business Performance Scorecard
Save time by quickly and easily detecting financial weaknesses and strengths.

2. Business Analyzer
Analyzing your business’s financial statements quickly will help determine weaknesses and strengths allowing you to know exactly where your business falls along the continuum, and just how far you are from peak performance.

3. Assessing Performance
You can quickly assess financial performance and detect financial red flags with benchmarking displays that show your company’s performance indicators alongside your industry peers across various KPIs.

4. Optimizing Performance
Business owners have to go beyond identifying financial weaknesses with “what-if” scenario modeling for overall business performance.

5. Industry Metrics
Use Industry Metrics to help ensure your financial projections are based in reality with several key performance indicators with immediate financial insights into your industry through income statement and balance sheet trends, including all key financial ratios.

6. Relevant Benchmarking Data
Data shows your strengths and weaknesses compared to other companies in your industry. Anywhere you have a weakness, you need proven action items you can take to turn that weakness into a strength and ultimately grow your business!

Having the right financial tools makes managing and understanding your business’s financial performance clearer and easier. C-leveled’s financial software IndustriusCFO offers a dynamic range of financial analysis tools ideal for benchmarking and performance optimization. IndustriusCFO provides easily downloadable PDF reports putting everything you need to know about your company’s finances right at your fingertips.