Managing Financial Risks in Small to Mid-Sized Businesses: A Controller’s Perspective

When I first stepped into the role of Controller, my idea of financial risk management was basically just “keep the books clean and cross your fingers.” Not exactly a sound strategy.

Over time, I realized that in small to mid-sized businesses, financial risk isn’t just an occasional concern. It’s something that needs constant attention.

Whether it's market shifts, unexpected supplier issues, or even just a spreadsheet error, risks can creep in quickly and often when you're least prepared.

One of the biggest challenges I’ve seen is how unpredictable cash flow can be. A 2024 U.S. Bank study found that 82 percent of business failures were tied to poor cash flow management. That number is staggering, especially when you consider that many of those businesses were actually profitable on paper. The problem is, profits don’t pay vendors or cover payroll if the timing is off. Forecasting became less of a budgeting exercise for us and more of a reality check. It wasn’t about guessing the future. It was about staying close to the numbers and adjusting quickly when things shifted.

Another area that often gets overlooked is customer concentration. At one company, over half of our revenue came from just two clients. That setup might feel secure during good times, but it leaves a business incredibly exposed if even one of those clients pulls back. Diversifying your revenue streams isn’t just a growth tactic, it’s a risk management strategy. The same goes for reviewing your contracts. We started looking more closely at payment terms, cancellation clauses, and delivery penalties to make sure we weren’t quietly absorbing too much risk.

Some of the most damaging financial risks actually come from inside the business. According to the Association of Certified Fraud Examiners, small businesses lose about twice as much per fraud incident compared to larger companies. That’s largely due to weaker controls. I’ll admit, it’s not fun being the person who insists on dual approvals or audits every company card statement. But it’s a whole lot better than explaining to leadership how five figures disappeared from the books without anyone noticing.

Technology has definitely helped with efficiency, but it also comes with its own risks. Cloud-based systems and automation tools are powerful, but they need to be secured. A 2025 report from IBM noted that the average cost of a data breach for companies with fewer than 500 employees was $3.31 million. That’s a staggering number for any business, let alone one with a lean budget. We made a point to invest not just in financial software, but also in IT support, password protocols, and ongoing training to reduce exposure.

In my experience, managing financial risk in an SMB isn’t about avoiding risk entirely. That’s impossible. It’s about staying informed, building strong habits, and putting controls in place that catch small issues before they become big ones. The businesses that navigate financial uncertainty successfully aren’t always the biggest or the flashiest. They’re the ones with teams who pay attention and take action before things spiral. And in the role of Controller, that responsibility often starts with us.