How Healthy is Your Business? It’s Time for a Business Health Check
For many business owners, the pandemic has disrupted ‘business as usual’. Budgeting and business planning have been put aside, while businesses scrambled to adjust to changing regulations, lockdowns, and fluctuating demand. With vaccination targets reached, and business as usual returning, now is a good time for a business health check.
What is a Business Health Check?
A Business Health Check encourages business owners to review expenses, debt, inventory, and cash flows to assess the overall health of a business. This can help to identify key opportunities for growth, reduce costs that aren’t necessary or aren’t providing a return, and streamline operations. Essentially, it helps identify issues early – before they become bigger problems.
Ordinarily, we would encourage businesses to conduct a thorough and comprehensive health check annually. However, any significant disruptions or challenges should also act as a trigger for businesses to undertake another health check. If you haven’t yet assessed where your business is after all the changes over the past 18 months, it’s time.
Undertaking a Business Health Check
Your business health check should help you identify issues that might be a warning of larger issues to come. You should ask and answer questions that help you assess four major areas within your business. These will vary depending on the maturity of your business, your goals, and your market, but common questions include:
Check Your Financial Health
Ask and answer:
- Are you generating profits? If so, are they consistent?
- What is your liquidity ratio – and is it healthy?
- Are you maintaining healthy (and serviceable) levels of debt?
- Is the average inventory age in line with industry standards (or better)?
- Are the number/amount of bad debts you’re incurring manageable? If not, what needs to change?
Check Your Cash Flow Health
Ask and answer:
- Are you able to service your expenses each month? If so, is making the payments comfortable or a stretch?
- Have you borrowed money to pay your monthly expenses?
- Do your customers make payments in a timely manner?
- Are your customer payments predictable?
If you need to improve your business cash flows, read our blog post on the topic.
Check Your Operational Health
Ask and answer:
- What pain points are you facing?
- Are your customers satisfied with your services?
- Could you operate more efficiently by investing in technology?
- Do you have the right staff in the right positions?
- Do you have high staff turnover? (Read this blog post for tips on reducing turnover!)
- Have you got strong relationships with diverse suppliers?
Check The Health of The Market
Ask and answer:
- Are you operating in a growing market? If so, are you taking steps to maintain your market share or improve your position in the market?
- Are you operating in a shrinking market? If so, are you taking steps to pivot or otherwise increase your viability and profitability in a shrinking market?
Ask Sharp Accounting for a Comprehensive Business Health Check
A Business Health Check offers insights and highlights opportunities to help businesses grow, while reducing unnecessary expenditure. It is a key exercise for businesses that want to thrive in the short and long term.
At Sharp Accounting, our knowledgeable team of accountants regularly helps business owners assess the health of their business. Our Business Health Check services help you assess where you are, and where you need to go.
To find out more, contact us:
