Finance done wrong: 3 top financial mistakes to watch out for
She’s won’t give an inch. He’s a hot mess over failed expectations. Sounds like a Jennifer Aniston movie, right? Wrong. These are grown people looking at the numbers side of their business in a finance done wrong drama that is as unnecessary as a Friday meeting at 4 p.m.
Here are the top financial mistakes people make in business. Quite literally, it pisses me off. Because they seriously hold companies back. Only when you get past these blunders can you really grow your business.
1. AN UNEXPLAINED OBSESSION WITH HEAD COUNT.
Honestly, people get neurotic that God forbid if they don’t stick to the budgeted head count they’ll be struck by a lightening bolt for every person they hire over said number. (Is the person who came up with that number still here, by the way?). Worse, this self-imposed imprisonment then leads people to hire contractors so increased head count doesn’t show up as a line item.
In the end, you still have the needs, you still incur cost AND you lose more control. It’s short-sighted. OK, you’ve pushed me to the brink, I’ll say it: IT’S STUPID.
If you have a short-term need or a project it is OK to get contractors. Otherwise, you are just fooling yourself.
2. A DEEPLY COMMITTED LOVE AFFAIR WITH TAX STRUCTURE.
This is the classic story of the tail wagging the dog. Some people get so attached to tax structure and savings strategies that they let tax regulation define their business. The approach is akin to walking backwards. Figure out what your business is and then figure out the tax structure. Don’t let taxes be the driver.
Example: I won’t make a donation to this nonprofit because I may not be able to deduct the whole amount for tax purposes. OK, how about the great exposure it will give you or how the donation reflects your values? The taxman doesn’t care about those things – but you can and should.
3. THE CAPEX STUBBORN STREAK.
Obsession about capex absolutely drives me bananas. As you read this, you most likely have a budget for 2017. Say you have a capex budget that allows for one new CNC machine, 12 new computers, and updated software licensing keys to accommodate four new employees. Add repaving the parking lot and new shelving for the warehouse. It’s all in the budget.
Now, there’s this perception that budgets are nonnegotiable: We said it – so we have to do it. But what if the year isn’t going so well or you need a new roof or the year is going great and you need to upgrade your marketing automation system to handle the influx of sales leads? Postpone the paving of the parking lot. I know you said you were going to do it, but budgets are not written on stone tablets. You have to have discipline, but you can’t play hostage to a spreadsheet.
That is nothing compared to spending when you don’t have to – just because it is in the budget. Hurry, get the CNC machine now even though we may not need it for 8 months.
It’s part of the process to change the process during the process. Your budget is a reference, a guide, a character sign of a good CFO, a lodestar that guides your ship. Your budget is not a set of handcuffs.
GABBY’S BIG TAKEAWAY:
When it comes to financial forecasting and follow-through, be limber.