Business financial planning blunders to avoid

Experts weigh in

As business owners look forward to 2019, financial planning is top of mind. But are you doing it wrong?

In a recent blog post, Lauber Business Partners laid out a few of the most common financial planning blunders businesses should avoid. In the spirit of that list, BizTimes checked in with a few experts on which errors they see often.

Tim Steffen
Mike Flynn
Mark Wiesman

Failing to have a cash flow plan. “Obviously, cash is what makes the business go and if you’re short cash, it definitely puts a serious crimp in your operations in terms of getting materials for your manufacturing process or pay labor or whatever the case may be,” said Mark Wiesman, president and owner of Lauber Business Partners. “A lot of small businesses don’t necessarily think consciously about their cash flow and as the business grows, they end up getting strung up.” Creating a plan allows an owner to adjust as needed.

Not separating personal and business expenses. “Sometimes they kind of blur the line a little bit as to what’s a personal expense and what’s a business expense,” said Tim Steffen, director of advanced planning in the Private Wealth Management practice at Milwaukee-based Robert W. Baird & Co. Inc. “The accounting for that can create some tax issues for them.” If you take a trip for work and then stay on for a few days as a vacation, be sure to diligently track which days are primarily business versus pleasure, and use your personal card for the latter expenses.

Failing to align tax strategy with growth strategy. “They don’t want to pay any taxes so they go to their accountant and say, ‘Give me all the strategies you can to eliminate or avoid any taxes,’” said Mike Flynn, president of the Milwaukee region at First Business Bank. But those strategies can take cash out of the business, and even if it’s profitable, it may no longer qualify for a loan as a result. “They should be talking to their banker and their accountant at the same time and working collaboratively.”

Not establishing and planning metrics. “Really understanding what the key metrics are for your business in order to control it and get visibility into the business is important,” Wiesman said. Productivity, inventory turns, days sales outstanding and other metrics can be tracked so you can take action when an important indicator changes.

Ignoring security measures. Every few weeks, we hear about another company that’s been hacked. Don’t become one of them. “It’s not just the operations of the business, but it’s all of your customers and their information,” Steffen said. “Do your customers want to continue working with you if they know that you aren’t securing their data?”

Not communicating – and following – succession plans. “We’re in a time now where the baby boomers are starting to retire and sell their businesses, but they haven’t really prepared the next generation, their sons and daughters, to take over the business well. The overarching issue is the parent doesn’t really give up control,” Flynn said. That can lead to conflict, which can hurt a business.

Only planning for the present. A lot of small business owners get caught up in the day-to-day. But sitting back and taking the time to look forward with strategic planning can save headaches down the line, Wiesman said. “It’s a real challenge for a small business because the owner is typically wearing a bunch of different hats. It’s difficult to take the time, but if you don’t take the time, you likely will run into some sort of issue as you go forward.”

Getting behind on tax laws. Say goodbye to expensing those Bucks tickets. “You can’t deduct entertainment expenses anymore and meals are much more difficult to deduct,” Steffen said. And businesses will want to reevaluate their structure in light of the new tax laws. “If you’re a company that wants to keep more of the assets inside the company and not have to worry about paying it out to shareholders or the owners, then maybe a C corp is going to make more sense.”

Becoming overly optimistic about growth. “So they go out and buy a big piece of equipment and they don’t get enough use out of it and they’re paying heavy payment on it,” Flynn said. Another common error: Buying a large chunk of real estate and then not filling it or subleasing it.

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Molly Dill
Molly Dill, former BizTimes Milwaukee managing editor.