1. COMMON FINANCIAL MISTAKES How to Avoid the Pitfalls that Trip Up Most Business Owners

2. © 2009 Owl Bookkeeping and CFO Services Learn from Someone Else’s Mistakes “All of us can succeed in business, if we can learn from experience, and realize that it doesn’t have to be our own.” Joe Francis

3. © 2009 Owl Bookkeeping and CFO Services Mistake 1: Assuming the CFO Knows it All Business owner has ultimate responsibility for financial health of the company Most business failures can be traced to poor management resulting from lack of knowledge  Most common cause: poor management of financial activities (32% of all failures)

4. © 2009 Owl Bookkeeping and CFO Services Mistake 2: Not Understanding the Business Model Working hard and still losing money? Questions to ask:  Do you have an overall pricing philosophy (high, medium or low)? If low, you may need to re-think!  When setting prices, do you take all of your operating costs into account, including your own salary?  What are your competitors charging, and what do they offer for that price?  Do you have specific tasks or customers that are barely profitable for you, or that may even cost you money?

5. © 2009 Owl Bookkeeping and CFO Services Mistake 3: Not Having a Plan No budget = no plan  Forces you out of day-to-day details to look strategically at your business  Take stock of where you’re at and set goals for where you want to be  Without a formal tool that nudges you to action, it will likely never get done

6. © 2009 Owl Bookkeeping and CFO Services Excuses that Don’t Fly “Budgets are too confining. I can’t stick with my initial estimates for 12 months!” “I won’t be able to react as flexibly to an unforeseen crisis if I have a budget.” “The budgeting process is too complicated and time consuming.” “Things change too quickly in my industry for me to commit to a budget.”

7. © 2009 Owl Bookkeeping and CFO Services Mistake 4: Being Unwilling to Leverage Yourself At least some debt is desirable  Leverage -- a profitable company with debt will earn far more than it would without it  With tax considerations, debt is nearly always cheaper than equity

8. © 2009 Owl Bookkeeping and CFO Services Mistake 4.5: Leveraging Yourself too Far Don’t hyperleverage yourself All debt is not created equal  Tailor every detail of your loans' terms to fit your future cash flows and cash needs Debt doesn’t doesn't work its magic all by itself  You have to be able to use the borrowed money in your business to create returns that are greater than the aftertax cost of your debt

9. © 2009 Owl Bookkeeping and CFO Services Mistake 5: Being Unwilling to Part with a Poorly Performing Employee Outgrowing your start-up staff  Sisters, neighbors, friends and kids Holding on too long does a disservice to your company and the employee

10. © 2009 Owl Bookkeeping and CFO Services Mistake 6: Trusting Too Much Small businesses (100 or fewer employees) are most vulnerable to employee fraud An average fraud scheme against a small business causes $127,500 in losses

11. © 2009 Owl Bookkeeping and CFO Services Best Practices for Preventing Fraud Let them know somebody is watching Have a hotline available for tips Segregate cash related functions Implement active oversight  Owner should always get an unopened bank statement and review all canceled checks

12. © 2009 Owl Bookkeeping and CFO Services Mistake 7: Not Managing Cash Flow Most companies are too lax about getting paid in a timely manner  Letting payments string out 60, 90 or even 120 days is like lending that money to a customer, usually for free  A $10 million dollar company shortening the average collection time by just five days frees up $137,000 The longer you let delinquent accounts sit, the less likely you will collect on them  27% of accounts three months past due will never be collected  That figure jumps to 44% after six months and 75% after a year

13. © 2009 Owl Bookkeeping and CFO Services Mistake 8: Chasing Shiny Objects Shiny Object Syndrome  ADHD  Short Attention Spans Entrepreneurial Traits for Better and Worse  Curious  Minds that search relentlessly for alternatives  Can change direction on a dime

14. © 2009 Owl Bookkeeping and CFO Services Shiny Object Syndrome: How do You Know When It’s Gotten Out of Hand? Sales are falling Bank account is shrinking Gross profit margins are falling Employees have lost enthusiasm You have a niggling feeling. And there’s a hush around you.

15. © 2009 Owl Bookkeeping and CFO Services Boiling it Down to the Basics Do you know how to decipher the three reports every business owner must review monthly?  Balance Sheet, Income Statement and Cash Flow Do you know how those figures tie to the three bottom lines of your business?  Net Profit, Operating Cash Flow and Return on Assets

16. Stephanie Laitala 612.816.6007 stephanie@owlbookkeepingandcfo.com Questions © 2008 Owl Bookkeeping and CFO Serviceswww.owlbookkeepingandcfo.com