How NOT to Run Your Finance Function: 8 Ways to Destroy Your 7-Figure Business

Using Charlie Munger's inversion principle to identify finance function failures that could be costing your business millions

When you're running a multi-million pound business, it's easy to get caught up in what you should be doing with your finances. But what if we flipped the script entirely?

The late Charlie Munger, Warren Buffett's legendary business partner at Berkshire Hathaway, had a powerful philosophy: "Always invert." Instead of asking what makes something successful, he'd ask what would make it fail spectacularly.

This approach is particularly revealing when applied to finance functions. Rather than listing best practices you've heard a thousand times, let's explore the finance mistakes that could systematically destroy your 7-figure business.

Why Inversion Works for Business Owners

Munger's inversion principle is psychologically powerful because it helps you recognise problems you're already living with. When someone tells you to implement better cash flow management, you think "I'll get to that later." But when someone points out that you're destroying your business by ignoring cash flow, suddenly you see the urgency.

A recent discovery call with a £5+ million turnover business perfectly illustrated this. As they listed their challenges, it became clear they were committing nearly every finance function sin in the book. The problems weren't theoretical – they were happening right now, costing real money and limiting real growth.

The 8 Finance Function Disasters That Will Tank Your Business

1. Put Someone Inexperienced and Unqualified in Charge

Here's how to guarantee finance chaos: Make your PA, office manager, or receptionist responsible for your entire finance function. Better yet, just handle it yourself as the MD – after all, who needs actual finance expertise?

The reality is sobering. Most 7-figure business owners would never hire an unqualified bookkeeper as head of finance in a large corporation, yet they're perfectly comfortable having them run finances in their own multi-million pound operation.

The hidden cost: Without proper finance leadership, you're flying blind. You can't make informed decisions about business growth, profit optimisation, or cash flow management because nobody in charge actually understands what these numbers mean for your business.

2. Use Your Parents' Accountant (Because They've Always Been "Good Enough")

Nothing says "business disaster" like using the same accountant your grandparents recommended – the one who's never heard of cloud accounting or management accounts.

Many business owners choose accountants the same way they choose doctors: they assume professional credentials equal competence for their specific needs. Unfortunately, an accountant experienced in year-end compliance and VAT returns is not the same as a proactive accountant who can drive profit and support business growth.

The hidden cost: Traditional accountants often can't provide the strategic financial insights that 7-figure businesses need. They're not equipped to help you understand your profit and loss patterns, optimise cash flow, or implement systems that support rapid scaling.

3. Do Everything Manually

Want to guarantee inefficiency? Print every invoice for manual approval, maintain separate spreadsheets for tracking, and manually calculate your profit instead of trusting your accounting system.

Create sales invoices in Word documents, spending precious time figuring out the last invoice number you used. Key every piece of data manually, ensuring maximum opportunity for human error and minimum productivity.

The hidden cost: Manual processes don't scale. As your business grows, these inefficiencies become exponentially more expensive. You're paying people to do work that computers can do better and faster, instead of solving strategic problems.

4. Duplicate Every Task (Just to Be Safe)

Enter all your invoices into your accounting system, then create a separate spreadsheet to track the same information. Keep your own profit calculations alongside the system reports. Maintain multiple versions of the same data across different platforms.

This "belt and suspenders" approach feels safer but creates a maintenance nightmare that gets worse as your business grows.

The hidden cost: Duplication creates confusion about which data is accurate and wastes enormous amounts of time on administrative tasks that add zero value to your business.

5. Control All Payments Personally (And Pay Everything Immediately)

As a control-oriented business owner, insist on personally paying every supplier bill. Don't set up proper approval processes or payment schedules – just pay invoices as soon as they hit your desk to "get them off your plate."

The hidden cost: This approach destroys cash flow management and makes strategic payment timing impossible. You're also creating a bottleneck that prevents your business from operating efficiently when you're unavailable.

6. Skip Credit Control Entirely

Why waste time chasing customers for payment? Just focus on getting more sales and assume everyone will pay eventually. Don't send payment reminders before due dates, and definitely don't have a systematic process for following up on overdue accounts.

The hidden cost: Poor credit control is essentially giving your customers free loans while your own cash flow suffers. This becomes particularly dangerous as your business scales and outstanding amounts grow proportionally.

7. Run Multiple Companies Through One Accounting System

If you operate multiple businesses, save money by running them all through a single accounting system. Why pay for separate subscriptions when you can just mix everything together and sort it out later?

The hidden cost: This creates a nightmare for understanding individual business performance, makes inter-company transactions nearly impossible to track accurately, and prevents you from making informed decisions about each entity's profitability and cash flow.

8. Never Actually Look at the Numbers

The grand finale: just run your business from your bank account balance. If there's money in the bank, everything must be fine, right?

With all the chaos created by the previous seven mistakes, the numbers are probably unreliable anyway, so why bother looking at management accounts or profit and loss statements?

The hidden cost: Running a business without financial visibility is like driving blindfolded. You can't optimise what you can't measure, and you can't make strategic decisions without understanding your financial position.

The Root Cause of Finance Function Failure

Here's the striking realisation: every single one of these problems traces back to the first mistake – putting someone inexperienced in charge of your finance function.

A qualified finance director or finance manager understands why accurate monthly management accounts matter. They know why payroll journals need to be processed monthly, not just at year-end. They understand that the goal isn't just bookkeeping compliance – it's generating reliable financial information that drives business performance.

Without this strategic understanding, your team doesn't grasp why processes matter, leading to the shortcuts and workarounds that create the other seven problems.

The Power of Inversion in Practice

Charlie Munger became one of the world's wealthiest individuals partly because inversion helped him think differently about problems. This framework works because it's psychologically easier to identify what you're doing wrong than to implement what you should be doing right.

Consider using this approach with your own team. Instead of another meeting about "improving processes," try asking: "What would make our onboarding process absolutely terrible?" The lighter, more engaging approach often reveals problems that formal analysis misses.

Your Next Steps

Look at this list honestly. How many of these finance function disasters are happening in your 7-figure business right now?

The good news is that recognising these problems is the first step toward fixing them. Each mistake you identify is an opportunity to implement systems and processes that will support your continued growth.

Your business has already achieved impressive success despite these challenges. Imagine what becomes possible when your finance function actually supports your ambitions instead of holding them back.

Ready to transform your finance function from a business liability into a growth engine? Our team specialises in helping 7-figure businesses implement world-class financial systems and processes. Contact us to discuss how we can support your business's next phase of growth.