Healthy finances are key to small business success. With the end of financial year fast approaching, it is important to sit down and spend time giving your books a thorough once-over. If you find that they are in good shape, perfect. If they’re not, you should take action to better prepare your business for the upcoming tax season.
Simple steps to give your business a financial health check:
- Use financial ratios
- Solvency: total liability
- Liquidity: current assets /current liability
- Profitability: gross profit /total sales
- Conduct a strategic review: This can help you identify any issues negatively impacting your business.
- Review your cash flow: Small business needs positive cash flow to function but if more money is going out then coming in, you could be in trouble.
- Review your debts: If you have too much of bad debt your business can be in trouble. Assess your debts and interest rate. If your interest rate is too high you may want to consider refinancing to lower you interest rate and monthly payments.
Taking the time to check the financial health of your business may not be the most exciting task but it is crucial for the success of your business. Identifying issues and finding a solution will set yourself up for a smooth and profitable future.