It’s that time again – when thoughts turn to creating new habits that will help us get in shape. Resolutions are made to spend less time staring at digital screens or binge-watching our favorite shows. Those who manage to keep their resolutions all year attribute their success to an accountability partner. This applies not only to our personal life but also to business.
Checking the Health of the Organization
No one regrets adopting and maintaining a healthy lifestyle. What people do regret is that they waited too long. Again – this holds true in business. To succeed, businesses should establish and carefully adhere to a set of financial guidelines. What better time to get started than at the beginning of a New Year!
5 Best Practices to Keep You on the Right Track
A recent report by a U.S. bank stated that 82% of all businesses fail, and the reason can be traced back to the mismanagement of cash flow.
Let’s focus on ways to keep your business from becoming a statistic and become one that will not only survive – but thrive.
1. Budgeting and Forecasting
Budgeting and forecasting provides information that allows you to check the company’s vital signs and assess how decisions impact cash flow.
Cash flow to a business is like oxygen to a human – they are necessary for long-term health and survival; without a steady stream of cash, expenses won’t be paid. A budget provides data that illustrates past performance, serving as a tool to help you forecast where you are headed. Accurate forecasting allows you to observe the flow of cash – whether it’s coming in or going out of the business. Monitoring the circulation process will ensure that everything functions properly.
2. Consider Bringing in a Fractional CFO Advisor
A business may be founded by one person but it’s extremely rare that a person can single-handedly grow a business to reach the 6 or 7 figure mark without assistance.
Leaders typically are focused on day-to-day operations and lack the time and vision to chart a path forward. A fractional CFO advisor can deliver fresh perspectives and new insights; they can see through the haze and isolate what is leading to growth and what may be hindering it. Their expertise is indispensable as they can help ensure that your business will be profitable in the short and long term.
3. Automate Systems and Processes
Fractional CFOs have acquired a high level of proficiency, and they understand that digital tools drive success. They tap into their deep technology skills to extract real-time, relevant, and secure data.
Businesses that haven’t already adopted the latest technology solutions for finance and accounting ERP implementations will lack the agility to respond as needed to keep pace in a competitive market.
4. Risk Mitigation
Business risks are more pronounced today than they were prior to the advent of the digital universe. Innovations have reshaped our world since Benjamin Franklin coined the phrase: an ounce of prevention is worth a pound of cure. Organizational leaders are usually inundated with operations and sales to think long and hard about risk exposure, not only internal but also the potential for third-party supplier risks. If you experience an unfortunate loss, do you have plans in place to act immediately? Two procedures that should not only be on your radar – but should be implemented are:
● Pre-Risk Mitigation – setting up right processes and controls
Consider the right processes and controls to streamline data, verification, and approvals – and its accountability. Improve operations, protect assets, and prevent fraud.
● Post-Risk Mitigation – evaluating the risks to mitigate the litigation.
Recurring Internal / Forensic Audits ensure accuracy and compliance on both the financial and IT side. Having a plan in place to conduct quarterly Accounts Payable and Time & Expense audits will maintain data accuracy and compliance.
5. Have a Plan to Recover Revenue
Tax filing season will soon be in full swing which means organizations are already looking for ways to reduce their tax liability. One cash register that’s often overlooked is the one marked: Research & Development (R&D) tax credits.
It’s estimated that IRS tax credits save U.S. businesses – spanning all industries and sectors – between $10 to $12 billion annually. So why aren’t more businesses taking advantage of these credits to lower their tax bill? Most self-censor: they mistakenly think it’s reserved only for business giants.
R&D tax credits aren’t the only way to recover revenue; your business may receive a cash flow injection by performing Royalty / Licensing and other Compliance Audits. In addition to reducing your effective tax rate, these cash incentives can enhance your ROI and strengthen contractual relationships.
How a Fractional CFO Advisory Team can Help you Chart a Successful 2022
If you lack the resources to commit to hiring a full-time CFO – yet need this invaluable expertise – give us a call. With our rich blend of experience and strong technology solutions, Astute can provide you with value-driven solutions that will give you a solid grasp of your business as you enter the new year.
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- Employee Retention Tax Credit for Start-ups and Other Challenging Circumstances - February 3, 2023
- Employee Retention Tax Credit (ERTC): The only COVID-related assistance that is still available in 2023 and through 2024 - January 10, 2023