Here’s What Industry Insiders Say Hurts Company Finances The Most
Nobody thinks company finances are simple. You’re always trying to balance your expenses and income, trying to get the most productivity from the resources at your disposal. But now industry insiders are coming out and actively talking about what hurts company finance the most – and it’s not always what you think. Here’s what they have to say on the matter:
Overspending On Travel
We have this idea that being a successful business leader requires endless travel to different parts of the world, but rarely is that true. Unless you’re trying to launch a product in a different country, it’s probably not necessary at all, and just a big waste of money.
Spending excessively on travel, though, can quickly hurt company finances. Business-class trips aren’t cheap. And when you throw in the cost of the flight, transfers, food, and accommodation, it all quickly adds up. You can easily burn through the average worker’s annual salary, just paying for one person to get around the planet. Do that for the entire team, and you can soon find yourself in the red.
Failing To Track Your Financial Position Across The Company
When you run a business, multiple people have access to funds. Thus, they’re often able to make independent decisions about where money will be spent without consulting the person at the top.
In most cases, this is okay. But sometimes, it can create real headaches. Organizations often lose track of where they’re spending money. And when that happens, they don’t allocate internal budgets correctly. Some departments wind up with too much, and others don’t get enough.
The basic solution here is to have what’s called a “single point of truth” for all people with authorization in the organization. Most accounting software for enterprise is now in the cloud, meaning that those permitted can access it from wherever they like. In other words, multiple stakeholders can view crucial financial information without restricting access to anyone else.
We’re currently living through an era of exceptionally high corporate debt. Over the last ten years, consumers paid off debts, but businesses took them onto their balance sheets.
In the most egregious examples, companies actually borrowed money to buy back their stock to increase the price. Thus they took on increasing liabilities to provide investors with a return instead of actually using that money to invest in better products and services. It’s a dangerous shell game, and it will eventually come back to bite companies that engage in it.
Corporate debt, however, isn’t something that businesses have to take on. It’s still possible to bootstrap your way to success, even in today’s economy.
Operating With Financial Leverage
Finally, industry insiders often warn about the consequences of operating with financial leverage. Going into business is already dangerous enough. But multiplying debt to expand and grow requires some very optimistic thinking about the future of the industry. When leveraged companies fail, they tend to do so rapidly, and without a great deal of warning. It’s probably worth avoiding.
Categories: Outside Contributors