Why Most Businesses Struggle Financially
Financial mismanagement is one of the leading reasons why businesses fail. Many entrepreneurs start with a great product or service, but without a solid financial strategy, even the most promising businesses can struggle to survive. One of the biggest mistakes business owners make is neglecting financial oversight, which can lead to serious cash flow issues, unpaid invoices, and eventually business failure.
In a recent episode of the BPAF Podcast, Sarah Webb, a seasoned financial expert and founder of Web CFO, shared valuable insights on how businesses can avoid financial pitfalls. Drawing from years of experience in corporate finance, tax, and business leadership, Webb highlights the #1 financial mistake that could kill a business—and provides practical solutions to ensure long-term financial health.
Meet Sarah Webb: A CFO with Real-World Business Experience
Sarah Webb’s journey into accounting and finance started at an early age. In the podcast, she recalls a childhood memory that hinted at her future in finance:
“I think I was always destined to be an accountant. As a child, I would pick out Valentine’s Day cards in the form of a checkbook and write checks to my classmates.”
After earning her degree from Texas A&M, Webb worked with prestigious firms like PwC and Alcon Laboratories. She later transitioned into running her own fractional CFO and accounting firm, Web CFO, where she helps small and medium-sized businesses manage their finances effectively. Her unique background in marketing and business leadership has given her an edge in growing her own company while helping clients make smarter financial decisions.
The #1 Financial Mistake That Can Kill Your Business
According to Webb, the biggest financial mistake business owners make is abdication of financial responsibility. Many entrepreneurs blindly trust bookkeepers, accountants, or financial staff without personally understanding the financial health of their business.
“I see a lot of business owners abdicate responsibility of the financials to an office staff or bookkeeper, someone they’ve trusted for years. They assume everything is being handled correctly, but often that’s not the case.”
This mistake can lead to:
1. Uncollected revenue (accounts receivable issues)
2. Excessive spending without financial oversight
3. Failure to track key financial metrics
4. Potential fraud or accounting errors going unnoticed
Webb emphasizes that business owners should regularly review financial reports, ask questions, and maintain direct involvement in financial decisions—even if they have a trusted team in place.
How a Fractional CFO Can Save Your Business
Many small businesses may not have the resources to hire a full-time CFO, which is why fractional CFO services have become increasingly popular. Webb explains that a fractional CFO provides high-level financial guidance without the cost of a full-time executive.
“If you’re above the $3 million mark in revenue and want to keep growing, it’s probably time to bring in a fractional CFO—even on a monthly or quarterly basis.”
A fractional CFO helps with:
1. Cash flow management: Ensuring businesses have enough liquidity to cover operations
2. Financial forecasting: Preparing for growth, investments, and market changes
3. Business budgeting: Controlling expenses and maximizing profitability
4. Investor and bank relations: Securing funding and maintaining financial credibility
Webb highlights that many fast-growing startups or businesses with outside investors should bring in a CFO much earlier, even if they haven’t hit high revenue levels yet.
Three Essential Numbers Every Business Owner Must Track
Webb stresses that successful businesses focus on three key financial metrics:
1. Accounts Receivable (AR)
Many businesses ignore AR, assuming that invoices will eventually be paid.
“If you cannot collect, your family doesn’t eat,” Webb warns. Businesses must actively monitor and follow up on outstanding payments.
2. Gross Profit Margin
Understanding how much profit remains after direct costs is critical for sustainability.
Businesses that fail to maintain healthy profit margins often struggle to scale.
3. Cash Reserves
“This is how many weeks of cash you have on hand,” Webb explains.
Businesses should maintain enough cash to cover unexpected expenses or slow sales periods.
Without tracking these numbers, business owners risk running out of money before they even realize there’s a problem.
Avoiding Financial Disaster: Actionable Steps for Entrepreneurs
To avoid financial trouble, business owners should take proactive measures to strengthen their financial foundation:
1. Set Up Internal Financial Controls
- Regularly review bank statements, reconciliations, and transaction reports.
- Implement a dual-approval process for major expenses to reduce fraud risk.
2. Work with a Financial Expert
- Even if you have a bookkeeper, consult a CFO or financial strategist regularly.
- Ensure your financial reports align with your business goals.
3. Monitor Key Metrics Weekly or Monthly
- Use dashboard tools to track AR, cash flow, and profit margins.
- Establish a habit of reviewing reports to spot trends before they become major issues.
4. Use Financial Automation Tools
- Many businesses underutilize accounting software like QuickBooks or NetSuite.
- Automating invoice collection, expense tracking, and reporting can improve accuracy and efficiency.
By implementing these steps, business owners can gain better financial control and make more informed decisions about their company’s future.
Listen to the Full Podcast Episode & Learn More
The insights shared by Sarah Webb in this episode provide actionable advice for any business owner looking to improve their financial management. To hear the full discussion, including additional expert tips, tune in to the BPAF Podcast.
Listen now:
Conclusion: Take Control of Your Business Finances Today
Many business failures are not due to bad products or poor customer service, but rather bad financial management. As Sarah Webb emphasizes, business owners must take an active role in understanding their finances to ensure long-term success.
By tracking key financial metrics, hiring expert guidance, and improving internal financial controls, entrepreneurs can avoid costly mistakes and create a profitable, sustainable business.
For more expert insights on business finance, accounting, and growth strategies, be sure to subscribe to the BPAF Podcast and stay informed on the latest financial trends.
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